Section 424

Inactive Company.—(1) Where a company, other than a listed company, is formed for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the registrar in such manner as may be specified for obtaining the status of an inactive company.

Explanation.—For the purposes of this section—

(a) “inactive company” means a company, other than a listed company, which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years;

(b) “significant accounting transaction” means any transaction other than—

(i) payments made by it to fulfill the requirements of this Act or any other law;

(ii) allotment of shares to fulfill the requirements of this Act; and

(iii) payments for maintenance of its office and records.

(2) The registrar on consideration of the application shall allow the status of inactive company to the applicant and issue a certificate in such form as may be specified to that effect.

(3) The registrar shall maintain a register of inactive companies in such form as may be specified.

(4) In case of a company which has not filed financial statements or annual returns for two financial years consecutively, the registrar shall issue a notice to that company and enter the name of such company in the register maintained for inactive companies.

(5) An inactive company shall have such minimum number of directors, file such documents as may be specified by the Commission through regulations to the registrar to retain its inactive status in the register and pay such annual fee as prescribed in the Link028 and may become an active company on an application made in this behalf accompanied by such documents as may be specified by the Commission through regulations on payment of such fee as prescribed in the Seventh Schedule. 

(6) The registrar shall strike off the name of an inactive company from the register of inactive companies, which has failed to comply with the requirements of this section.

(7) Any contravention or default in complying with requirements of this section shall be an offence liable to a penalty of level 2 on the standard scale and in case false or misleading information has been given to obtain the status of an inactive company, the directors and other officers of the company in default shall be liable to imprisonment for a term which may extend to three years.

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