Dormant Companies: Global Filing Rules and the Case for Reform

What Is a Dormant Company?

A dormant company is one that remains inactive or inoperative—typically not engaged in business-as-usual operations. The reasons may vary, but the key implication is reduced or suspended activity, which affects filing obligations before regulatory authorities.

This has implications for regulatory filings, and interestingly, different countries approach dormancy in markedly different ways. Did you know that in some countries, a company can be dormant without filing full accounts, while in others, even ‘never-traded’ firms must comply with annual filings?

Global Filing Requirements – A Comparative Snapshot

The UK Companies Act, 2006 gives specific exemption to dormant subsidiaries of parent companies from preparing individual accounts for a financial year (Section 394A) and from filing with the Registrar (Section 441). Additionally, the UK Companies House offers Form AA02 for non-subsidiary companies where the only accounting transaction is the initial share issuance.

In India, dormancy requires a formal application via Form MSC-1, subject to multiple conditions. Upon approval, the Registrar issues a certificate in Form MSC-2, and the company must file Form MSC-3 annually as its dormant return.

Section 201A of the Companies Act exempts qualifying dormant companies in Singapore from preparing financial statements, but annual returns are mandatory under Section 197.

Dormancy is not automatic in Hong Kong. Under Section 5 of the Companies Ordinance, a company must file a formal declaration (Form N12) via a special resolution with the Registrar to be recognized as dormant. Annual Returns are exempt but only once dormancy is registered (Section 663).

In the U.S. and Canada, dormancy is not recognized under corporate law. Companies must file annual returns regardless of activity, and only formal dissolution halts filing obligations. Similarly, in the UAE, the absence of a statutory dormancy regime means entities must continue filing annual returns and statutory disclosures—even if inactive.

A Three-Step Reform Proposal

This raises several important considerations. In many jurisdictions, administrative reforms are still needed to streamline annual return obligations for dormant companies. While it is essential to maintain safeguards that prevent misuse of dormancy provisions, a globally adaptable three-step framework could offer meaningful relief for companies that have either never traded or become inactive due to adverse circumstances:

Self-declaration: Allow companies to file a formal self-declaration, supported by an affidavit, confirming dormant status from a specified date.

Statutory recognition: Amend corporate laws to formally define dormant companies and treat such self-declarations as valid dormant company returns.

Ongoing compliance: Require annual reaffirmation of dormancy to ensure continued eligibility and regulatory oversight.

This model balances regulatory integrity with administrative efficiency, ensuring dormant companies remain compliant without being burdened. As global business structures become more agile, regulatory frameworks must evolve to reflect operational realities.

Why This Matters

If you manage entities across borders, understanding each country’s dormancy rules can prevent costly oversights. It is time for global regulators to make compliance simpler — and smarter.

This article is intended for informational and thought leadership purposes only. It reflects the author’s views based on current knowledge and practices and should not be construed as legal or professional advice. For specific advice based on your case, consider consulting a qualified professional.