Dormant Accounts - Dormant Companies
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.
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.
Why have a UK 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. However, while the company is dormant, various other documents and annual company balance sheets must still be prepared and filed at Companies House.
Who runs a UK 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
A sole director cannot also be the company secretary.
What responsibilities do the officers of a dormant company have?
The responsibilities of a dormant company's officers are the same as for those of a trading company.
The directors and secretary manage the company on behalf of the shareholders or members. Among other things, they are responsible for holding meetings and ensuring that all the necessary returns, accounts and other documents reach Companies House by the due date.
What happens if documents are not delivered to Companies House?
The company's officers could be prosecuted because they are personally responsible for ensuring that documents are delivered on time. Failing to do so is a criminal offence. In addition, there will always be an automatic civil penalty for filing accounts late.
Companies House could also reasonably assume that the company is no longer required and strike it from the register.