A dormant company in the UK is defined as a company that
has had no significant accounting transactions during its
financial year. It is not sufficient that the company may
not have traded if the company has had any accounting
transactions at all with the exception of three specific
transactions that are allowed.
Transactions regarded as allowable for the company to
retain its dormant company status are the amount received
by the company in respect of the first shares issued to the
memorandum of association subscribers, the annual filing
fee payable to companies house and fines and penalties
issued by companies house for non filing of the annual
return.
The term dormant company has legal significance quite
separate to a company which might be described as a non
trading company. The difference being that a non trading
company may still have other financial transactions entered
into its accounting records which even though not related t
trading would disqualify that company as a dormant company
and the special rules applicable to a dormant company.
A company may be in a dormant state for a number of reasons
such as holding assets or documents or merely protecting a
trading name or perhaps plans to start a business have
otherwise been delayed.
There is no limit on how long a company can remain dormant
however there are procedures which must be followed to
avoid fines and keep the company on the companies house
register. Every dormant company must retain at least two
officers, a director and company secretary.
The directors are responsible for ensuring the dormant
company submits the annual return, form 363, each year
which contains details of the directors, company secretary,
registered office and shareholders. The companies house
filing fee of thirty pounds which is reduced to fifteen
pounds if the web filing service is used to file the return
online.
In addition the directors are also responsible for
submitting to companies house a set of financial accounts
each year. Failure to submit a set of accounts can result
in companies house striking off the company from the
company register and would also leave the directors open to
penalty fines and a potential criminal prosecution.
If the dormant company is no longer required the directors
can arrange for the company to be dissolved by one of two
methods dependent upon whether the company has outstanding
financial affairs. If the company has no liabilities then
it may be able to apply to companies house for a voluntary
striking off and dissolution. If the company has
outstanding financial affairs then the voluntary
liquidation procedures need to be followed.
The annual accounts a dormant company must submit to
companies house each year consist of a balance sheet which
also contains statutory notes in compliance with the
companies act. For a private company the annual accounts
must be delivered within 10 months of the financial year
end, commonly called the accounting reference date and
filed each year thereafter even if the company has never
traded.
The accounts of a dormant company can be filed online.
The annual accounts of a private dormant company do not
have to be audited if exemption is claimed and would
normally consist of an abbreviated balance sheet with the
statutory notes. The directors report and profit and loss
account are not required. If there has been any accounting
transactions that would have appeared in a profit and loss
account then the company would be disqualified from being
dormant except for the exemptions stated above.
Companies house provide a standard form for the submission
of a dormant company accounts. While suitable for companies
that have not traded this form may not be suitable for a
company that has balance sheet entries from a previous
years trading activities when a more detailed balance sheet
would be required.
The model set of balance sheets that a dormant might adopt
are available from the companies house website and contain
the statutory statements that should accompany the annual
accounts stating the entitlement to exemptions from
detailed accounts and audit and include a statement from
the directors that the accounts have been correctly
prepared.
The balance sheet must be signed and dated by a director
before submission. If the option to file online has not
been taken then the annual accounts should be posted either
to companies house at Cardiff if the company registered
office is situated in England and Wales or to Edinburgh if
the registered office is situated in Scotland.
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