A dormant company definition cannot be found in the legislative acts. However, it is a common term for various jurisdictions and legal systems which has basic features and requirements, advantages and disadvantages.
Check out our article to understand the exact dormant company meaning.
Why do you Need the Status of a Dormant Company?
- A dormant company may be kept in existence for future use. This could include restarting operations, resuming trading activities, or undergoing a change in ownership or management.
- Maintaining a dormant business can help protect its name, brand, and any associated intellectual property or assets.
- In some jurisdictions, dormant companies may be eligible for certain tax benefits or exemptions. It can help reduce administrative burdens and costs associated with taxation while the company is inactive.
How to Make Your Company Dormant?
To make your company dormant, you will normally need to follow certain procedures, depending on the jurisdiction in which your company is registered. Here are the general steps you may need to take:
- Notify the relevant government or regulatory authorities of your intention to make the company dormant.
- Ensure the company ceases all trading activities, business operations and revenue-generating transactions. This includes stopping sales, purchases and any other commercial activity.
- Pay any outstanding debts, liabilities or obligations the company may have. This includes paying creditors, suppliers and any outstanding taxes or fees.
- Inform relevant stakeholders of the company’s dormant status.
- File any required documents with the authorities to officially declare the company dormant.
- Even if the company is dormant, you may still need to fulfil certain ongoing compliance obligations.
Changing a Company from Dormant to Active
Here is a general guide on how to transition your company from dormant to active:
- Notify the relevant government authorities or regulatory bodies about your intention to change the company’s status from dormant to active.
- Update the company’s records to reflect its active status.
- Ensure that all financial obligations, such as taxes, fees, and outstanding debts, are settled before resuming trading activities.
- If necessary, reopen bank accounts for the company to facilitate financial transactions and operations.
- File any required documents with the authorities to officially change the company’s status from dormant to active.
Conclusion
Obtaining dormant company status is a very useful option. However, you need to consider all the pros and cons to ensure that this status benefits the company. It is also important to understand and comply with the requirements and procedures of the relevant jurisdiction. Our qualified lawyers can advise and assist you in obtaining this status.
FAQs
Why would you have a dormant company?
What’s the difference between a dormant company and a non-trading company?
Do I need a bank account for my dormant company?
Obtaining the status of a dormant company does not require a bank account. In addition, it is better to close your existing company bank account for the duration of this status to protect yourself from inadvertent financial settlements.
However, the process of registering your company in a particular jurisdiction may require you to open a bank account. If you don’t, you won’t be able to open a company and you won’t get dormant status.
