What does Company Status mean? Do you need to give attention to it?
"Company Status" of Indian Companies gets updated on a regular basis by Ministry of Corporate Affairs (MCA) based on compliance adherence by the Company related to filing of statutory documents.
Let's take a quick look at the numbers. There are more than 16 Lakh Companies registered in India. Most Companies, ~71% are in "Active" state. Big chunk of Companies (96% of them) have one of "Active", "Strike Off" or "Dormant" status. Below is the breakup:
Every Indian Company registered with Registrar of Companies (RoC), Government of India has one of the 14 status values associated with it at any point in time.
Let's take a detailed look at each of the 14 possible status:
Active status means the Company is Operational and has not defaulted in complying to statutory requirements enforced by the Ministry of Corporate Affairs (MCA). Statutory requirements are related to filing of returns, conducting Company Annual General Meetings (AGM), submitting Balance Sheets. etc. on a regular and periodic basis.
Out of the 16 Lakh Companies registered in India, around 11.3 Lakh (71%) have Active status.
If you observe a Company in Active state, for instance look at WIPRO LIMITED (CIN: L32102KA1945PLC020800), "Date of Last AGM" and "Date of Latest Balance Sheet" are not older than a year from the current date.
2. Active In Progress
Very few Companies (currently, less than 250) have "Active In Progress" status. A Company gets this status (temporarily) when it is in the process of getting transitioned from Dormant to Active.
Company in "Dormant" state, when it desires to resume operation, typically requests RoC by submitting a "Request for Normalising" in writing along with required forms/documents to get back to "Active" state. RoC upon successfully validating the forms/documents changes Company status to "Active In Progress". After this, Company is given some time to complete all pending annual filings. On successfully completing the same, Company would get "Active" status. Company would go back to "Dormant" state if it fails to complete the required formalities in the given time.
"Dormant" Companies are "Inactive" companies and have not been carrying out any business operation, or have not made any significant accounting transaction during the last two financial years, or, have not filed financial statements and annual returns during the last two financial years.
Registrar of Companies (RoC) issues a notice to the Company if it fails to file annual returns and financial statements for two consecutive financial years. Subsequently Company status gets changed to "Dormant" by the Registrar.
Also, a Company can voluntarily obtain "Dormant" status by applying to Registrar of Companies (RoC) when it is "Inactive". This can be done to save cost, and is typically done if the Company holds any Asset or Intellectual Property (IP) and have intention to resume Business in the future.
A Dormant Company can get to Active status by making an application to the Registrar.
A Dormant Company can continue it's Dormant status by complying to minimal statutory requirements and fee. On failing to do so, the Company gets struck off by Registrar and would get to "Strike Off" status.
Currently, around 1.4 Lakh (9%) Indian Companies have "Dormant" status.
4. Strike Off
Companies in "Strike Off" status legally cease to exist.
"Striking off" is one way to close a Company; the other way being "Winding up". Defunct Company can voluntarily apply to get struck off from Company Registry, or, it can get struck off by Registrar in case of non-compliance to statutory requirements as per the Indian Companies Act.
"Striking off" is a less cumbersome process compared to "Winding up" and hence is preferred by Companies with relatively low or no external liabilities.
Currently, around 2.5 Lakh (16%) Indian Companies are in "Strike Off" state.
5. Under Process of Striking Off
Companies in "Under Process of Striking Off" status are going through the "Strike Off" process.
Around 28,000 Companies are in this state currently.
Companies that are getting wound up (closed by following "Winding up" process) would have to go through "Liquidation" process, and on completing that would get to "Liquidated" status.
Approximately 1,100 Companies are in Liquidated state.
7. Under Liquidation
Companies in "Under Liquidation" status are going through the Liquidation process.
"Liquidation" process is part of Company "Wind up" and is done by a "Liquidator" appointed by the court. Liquidator during this process takes complete control of the Company, collects and realizes all the assets it has, and settles dues to the creditors before distributing surplus (if any) to the shareholders.
Approximately 5,600 Companies are "Under Liquidation".
Companies in "Dissolved" status legally cease to exist.
Currently, around 9,200 Companies are in "Dissolved" state.
When a Company get Merged into or get Acquired by another Company, it gets into "Amalgamated" status.
Approximately 17,700 Companies have "Amalgamated" status as on Nov 14, 2016.
10. Converted to LLP
"Converted to LLP" status of a Company means that the Company got converted into an LLP (Limited Liability Partnership). A Company must undergo the process outlined by RoC to get itself converted into LLP.
Currently, approximately 3,300 Companies are in "Converted to LLP" state.
11. Converted to LLP and Dissolved
"Converted to LLP and Dissolved" status of a Company means that the Company got converted into an LLP (Limited Liability Partnership) and the parent Company got "Dissolved".
Currently, approximately 4,800 Companies have "Converted to LLP and Dissolved" status.
12. Not available for efiling
Approximately 7,400 Companies are in "Not available for efiling" state.
Less than 10 Companies are in "Captured" state. It is not very clear to us as to when RoC assigns this status to Companies.
"Default" is temporary status assigned to newly incorporated Company for a very brief time before it gets an "Active" status.