Is a company dormant?

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members to understand whether or not a company is dormant under the Companies Act 2006.

Members may also wish to refer to the following related helpsheets:

• Is an audit required for a company?
• Is a company or group small?

The Companies Act 2006 specifies that, for the purposes of the Companies Acts, a company is “dormant” during any period in which it has no significant accounting transactions (section 1169(1)).

Significant accounting transaction

A 'significant accounting transaction' means a transaction that is required by section 386 to be entered in the company’s accounting records (section 1169(2)).

In practice, almost any transaction is likely to meet this definition as section 386 requires accounting records, in particular, to include entries from day to day of all sums of money received and expended by the company, as well as records of the assets and liabilities of the company.

A company will therefore not be dormant even if the only transaction during the period was, for example, the receipt of a dividend or the impairment of an investment.

Disregarded transactions

In determining whether or not a company is dormant, section 1169(3) requires the following transactions to be disregarded:

• any transaction arising from the taking of shares in the company by a subscriber to the memorandum as a result of an undertaking of his in connection with the formation of the company; or
• any transaction consisting of the payment of a fee to the registrar to change the company’s name, re-register the company, register a confirmation statement or penalties under section 453 for failure to file accounts.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.