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Introduction
 

This booklet will help you to manage a dormant company so that you send Companies House everything that is needed to keep the company on the register. It will help you to understand the simple - but important - legal obligations that still apply to a company even when it is dormant. For more general guidance about what companies have to send to Companies House, please see the other booklets in our guidance series.

If after reading this booklet, you are in doubt about your responsibilities, you should seek independent help from a solicitor or accountant.

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CHAPTER 1
What is dormant a company?

1. What does 'dormant' mean?

The term 'dormant' applies to a company that, in legal terms, has 'no significant accounting transactions' during a financial year. It is not the same as a 'non-trading company', a term that has no legal meaning. No significant accounting transactions means no entries in the company's accounting records. The amount paid for shares when the company is first formed and a few costs that the company may incur in order to keep the company registered at Companies House do not count as significant accounting transactions. There is more information about these allowable transactions at question 1 in chapter 3.

2. What is the difference between a non-trading company and a dormant company?

A company can be non-trading in the sense that it isn't doing business. But it may still have other accounting transactions going through its books, which means that it is not dormant in a legal sense. A dormant company must not have any accounting transactions except specific allowable transactions that can be disregarded, see chapter 3.

3. Why have a dormant company?

Companies can be dormant for various reasons, often to protect a company name, in readiness for a future project, or to hold an asset or intellectual property. Some flat management companies whose main purpose is to own the head lease or the freehold of a property choose to become dormant by setting up a residents' association to deal with any expenses.

A company can remain dormant for as long as necessary - indefinitely if, for example, its purpose it just to prevent the name being used by another company. However, there are expenses associated with keeping a company on the register. In particular, there is an annual document-processing fee payable on delivery of an annual return (Form 363s). The fee is £30 (or £15 for users of our Software Filing or WebFiling services). While the company is dormant, various other documents and annual company balance sheets must still be prepared and filed at Companies House. The company will have to decide how expenses will be met and who will run the company and be responsible for ensuring that all the legal requirements are met.

4. Who runs a dormant company?

If it is to remain dormant, a company cannot have paid employees because their wages would have to be recorded in the accounting records. However, all companies, including those that are dormant, must have:

• at least one director for a private company (two directors for a public company); and
• a company secretary.

• if the company has no debts or other liabilities, you may be able to apply for 'voluntary striking-off and dissolution' without going through formal insolvency proceedings; or
• if the company has affairs to wind up, then the company can be put into 'voluntary liquidation'.

For more information on these subjects see our booklets, 'Strike-off, Dissolution and Restoration' and 'Liquidation and Insolvency' (or, 'Strike-off, Dissolution and Restoration (Scotland)' and 'Liquidation and Insolvency (Scotland)' for companies registered in Scotland).

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CHAPTER 2
Dormant Companies and Companies House

1. What information does Companies House need to know?

Although a company may be dormant, Companies House must still keep up-to-date information about it on record and make this available to anyone who wants to know about the company. Basically, we need to know:

• Where to contact the company. The company's official address is known as its 'registered office'.
• Who runs the company. That is, particulars about the company officers.
• Who owns shares in the company - the shareholders (if the company has them).
• Where certain company registers are kept.
• What the company's financial year-end is. The company's financial year-end is known as its 'accounting reference date'.
• What the company's assets and liabilities are - its annual balance sheet.
• What rules govern the company - its memorandum and articles of association.

• the register of debenture holders;
• the register of directors and secretaries;
• the register of interests in shares (public companies only);
• the register of directors' interests in shares, or debentures, of the company;
• the register of members;
• the register of charges.

It is a form that every company - even those that are dormant - must send to Companies House each year. (The annual return should not be confused with annual accounts - the two are entirely different.) The annual return must be accurately completed to a particular date known as the 'made-up date'. This is:

• 12 months after the date of the made-up date of the previous annual return; or
• in the case of a company's first annual return, the anniversary of the date of incorporation.

For financial years beginning on or after 1 January 2005, the accounts may be prepared in accordance with international accounting standards.

Annual accounts must usually be delivered to Companies House within 10 months of a company's ARD for a private company, and 7 months for a public company. However, if a company's first accounts cover a period longer that 12 months, the maximum time allowed is 22 months from the date of incorporation (19 months for a public company) or 3 months from the ARD, whichever is longer. ARDs and how to change them are explained in our booklet, 'Accounts and Accounting Reference Dates'.

• notice of an increase or change in share capital - use Form 123 or 122 as appropriate;
• details of mortgages and charges - use Form 395 (Form 410 for companies registered in Scotland);
• various company resolutions - see our booklet, 'Resolutions';
• notice of the company's liquidation, receivership, administration or a voluntary arrangement - see our booklet, 'Liquidation and Insolvency' (or 'Liquidation and Insolvency (Scotland)' for companies registered in Scotland).

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CHAPTER 3
Accounts and audit exemption

1. What does 'no significant accounting transactions' mean?

As mentioned in chapter 1, a company is dormant if it has had 'no significant accounting transactions' during a financial period. When considering whether a company is dormant you can disregard the following financial transactions:

• payment for shares taken by subscribers who agreed to take such shares under the memorandum of association;
• fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
• payments made in respect of civil penalties imposed by the Registrar of Companies for delivering accounts to the Registrar after the statutory time allowed for filing.

• a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity;
• a person who carries on insurance market activity;

• it has been dormant since the end of the previous financial year; and
• it does not have to prepare group accounts for that year; and
• it qualifies as a 'small company' in relation to that year (see question 2 below), or would have qualified as small but for the fact that it is:
  • a public company; or
  • a member of a group of companies which included a public company, a banking or insurance company, a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.

• the annual turnover must be £5.6 million or less;
• the balance sheet total must be £2.8 million or less;
• the average number of employees must be 50 or fewer.

• Private companies that are dormant need only prepare and deliver to Companies House an abbreviated balance sheet and notes. A profit and loss account and directors' report do not have to be included in dormant company accounts filed at Companies House; but a directors' report and possibly a profit and loss account - if the company traded in the previous financial year - must be provided to members.
   
• Public companies that are dormant must prepare and deliver to Companies House a balance sheet and notes, directors' report and possibly a profit-and-loss account, if the company has traded in the previous financial year.

4. Can I obtain a standard form for dormant accounts from Companies House?

Yes, we provide a Form DCA (Dormant Company Accounts) - but it is not suitable for all dormant companies. For simplicity the form has been designed to reflect only the issue of shares to subscribers who agreed to take such shares under the memorandum. The form cannot be used to record other transactions. The flowchart below shows when a Form DCA can be used and when a more detailed balance sheet format shown at the Appendix is required.

Do not use this form if preparing accounts in accordance with International Accounting Standards (IAS).
 

When to use Form DCA


 

5. Companies dormant since incorporation

By definition, these companies can only have entered into the following financial transactions:

• the issue of shares to subscribers who agreed to take such shares under the memorandum;
• fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
• late filing penalties imposed by the Registrar of Companies.

Before sending your accounts to Companies House, check that you have:

quoted the correct company number and company name;

dated the balance sheet;

included all the relevant figures for the current and the previous year;

included all the dormant company statements;

stated when the accounts were approved; and

had the balance sheet signed by a director below all the statements.

 

Any company will cease to be exempt from audit as a dormant company if it:

• begins commercial or trading activities during the financial period; or
• would no longer qualify for some other reason.

If either of these happened, full accounts would be required for the financial year in which the company ceased to be exempt, and the directors might need to appoint auditors for the company. It may be that the company would qualify for exemptions as a medium-sized or small company. More information about company audit requirements and audit exemption for small companies is covered in our booklet, 'Accounts and Accounting Reference Dates'.

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CHAPTER 4
Further information

1. How do I send information to the Registrar?

You may deliver documents to the Registrar by hand (personally or by courier), including outside office hours, bank holidays and weekends to Cardiff, London and Edinburgh.

You may also send documents by post, by the Hays Document Exchange service (DX) or by Legal Post (LP) in Scotland. If you send documents, please address them to:

2.Where do I get forms and guidance booklets?

This is one of a series of Companies House booklets which provide a simple guide to the Companies Act.

Statutory forms and guidance booklets are available, free of charge from Companies House. The quickest way to get them is through this website or by telephoning 0870 3333636.

If you prefer you can write to our stationery sections in Cardiff or Edinburgh.

Forms can also be obtained from legal stationers, accountants, solicitors and company formation agents - addresses in business phone books.


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Appendix

Model balance sheets for dormant companies
 

If the company has only issued shares to subscribers who agreed to take such shares under the memorandum, then you will be able to use Form DCA. Likewise, Form DCA will be suitable if the company has paid fees to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns, or paid late filing penalties imposed by the Registrar of Companies provided the fees or penalties are paid by a third party without any right of reimbursement.

If you cannot use Form DCA, either because fees and penalties have been paid by the company or because the company has traded in the past and there are residual assets to be shown on the balance sheet, then the formats on the following pages provide a guide to the information you need to include (unless the company has opted to prepare accounts in accordance with international accounting standards for financial years beginning on or after 1 January 2005). These formats are designed to reflect all possible assets and liabilities that a company may have but you only need to include a particular heading if there is an amount other than nil to be shown.

• In format A, net assets must equate to the aggregate of capital and reserves.
• In format B, assets must equate to liabilities (including capital and reserves as balancing items).

(c) The directors acknowledge their responsibility for:

i. ensuring the company keeps accounting records which comply with section 221; and
ii. preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company.

Approved by the board of directors on...............(date) and
signed on their behalf by......................(DIRECTOR)

BALANCE SHEET FORMAT B

COMPANY NO: ................................

COMPANY NAME: .............................................

BALANCE SHEET AS AT ../../....

i. ensuring the company keeps accounting records which comply with section 221; and
ii. preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company.

If it is not included in the balance sheet, certain information supplementing the information given in the balance sheet or relevant to assessing the company's state of affairs must be given, if applicable, by way of notes to the balance sheet as follows:

• accounting policies, including those relating to depreciation and diminution in value of assets;
• authorised share capital;
• if shares of more than one class have been allotted, the number and aggregate nominal value of shares of each class allotted;
• information relating to any redeemable shares allotted;
• information relating to any shares which have been allotted during the financial year;
• information relating to fixed assets;
• details of indebtedness;
• basis on which sums originally denominated in a foreign currency have been translated into sterling;
• in respect to every item above (other than fixed assets) the corresponding amounts for the previous year;
• particulars of any subsidiary undertakings and of shares held in them, and the reason why group accounts are not required;
• where the company has acted as an agent for any person, the fact that it has so acted.

For financial years beginning on or after 1 January 2005:

• information about financial fixed assets that could have been included at fair value but which have been included in the accounts in excess of their fair value, and where no provision has been made for their diminution in value.

• particulars of any undertakings in which the company has a 'significant holding'. For example, the name and address of the business;
• the name of the company's ultimate parent company, and (if known) its country of incorporation;
• the names of certain intermediate parent companies, and their countries of incorporation or (if not incorporated) the addresses of their principal places of business;
• details of certain loans, guarantees and other such dealings made by the company in favour of directors and others.

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