Difference between Dormant & Strike-off Companies, Strike-off Company, Dormant Companies, Reason for striking-off, Ebizfiling

What are the differences between Dormant & Strike-off Companies?

Introduction

In the corporate world, it is common for companies to go through various stages of operation. Two of the most common terms that are used when discussing company status are dormant and strike-off companies. While both may seem similar, they have significant differences. In this article, we will explore the differences between dormant and strike-off companies and reasons for striking off a company along with why to obtain dormant status.

What are Dormant Companies?

The word “Dormant” means inactive or inoperative. In other words, a dormant company is a company that is registered with the object:

  • To hold intellectual property or assets for future projects and
  • Having no significant accounting transaction
  • Inactive Company

What are Strike-Off Companies?

A strike-off company is a company that has been dissolved by the relevant authorities and is no longer a legal entity. This can happen for a variety of reasons, such as failure to file annual accounts or tax returns or failure to carry out any business activities for an extended period. When a company is struck off, its assets become the property of the crown and any remaining debts are cancelled.

What are the Differences between Dormant and Strike-Off Companies?

Below are the eight major differences between dormant and strike-off companies:

 

Dormant Companies

Strike-Off Company

The company is still a legal entity.

The company is no longer a legal entity.

The company might have business activities to perform in the future.

The striking-off company has no ability to carry out any business activities.

The company must file annual accounts and tax returns.

The company has no obligation to file returns or annual accounts.

The directors remain liable for company obligations.

The directors are no longer liable for company obligations.

The assets remain the property of the company.

The assets become the property of the concerned authority.

It can be reinstated by filing the appropriate forms and fees.

It can be reinstated, but only in exceptional circumstances.

A company can be closed voluntarily.

The company can be closed by the relevant authorities.

It can be restored by registered companies.

It can be restored by registered companies, but only in exceptional circumstances.

 

What are the reasons for striking off a company?

The main reason for a strike-off is when a company ceases to trade, and its assets have been liquidated. Other reasons include:

  • The company is not carrying out any business activities and is not generating any income.
  • The company is insolvent and cannot pay its debts.
  • The company has failed to submit annual returns or financial statements.
  • The company has failed to pay corporation tax.

What are the reasons that a company can be a dormant company?

A company might become Dormant for a variety of reasons, including:

  • It is possible to register a company as inactive when the owners are planning to launch it and want to reserve a name for it.
  • When a company’s owners want to restructure it, they can apply for Dormant Status.
  • If the business owner needs to take an extended period off for reasons such as illness, travel, maternity leave, etc..

Conclusion

In summary, while dormant and strike-off companies may seem similar on the surface, they are actually quite different in terms of their legal status, ability to carry out business activities, and filing requirements. Understanding these differences can help business owners make informed decisions about the status of their company and how to proceed in the future.

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Author: siddhi-jain

Siddhi Jain (B.A.LLB) is a young and passionate Content Writer at Ebizfiling Private Limited. She enjoys reading and writing about legal topics and simplifying complex legal concepts for a wider audience. Her goal is to continue growing as a content writer and to become a subject matter expert in legal and business topics.

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