Filling accounts and submitting to the Company House is a responsibility that many business owners should fulfil on an annual basis; however, there is a lot of confusion when it comes to “Dormant companies”; and it doesn’t just relate to filling the accounts or not; many of us don’t fully understand this concept, which makes the process of deciding when a company is dormant even more complicated; the general concept is that a “company is dormant  if it has had no ‘significant accounting transactions’ during the accounting period”[2570]; however, how do we determine is a transaction is significant enough to include it in our books? If you are not an Accountant or don’t have a lot of finance/bookkeeping experience you might not know the answer.


Non-trading Companies, Dormant Companies and Accounting Transactions

There is a fine line between a non-trading and a dormant company and in order to separate one from the other we need to look at the accounting transactions going through their books. A dormant company shouldn’t have any records in their books; however, even just one transaction such as bank charges or interests, regardless of any other debit or credit in the statement must be recorded, converting a possible dormant company into a non-trading entity. There are very few transactions that are not included in the financial statements, the most common ones are[2570]:

1)     Payment for shares taken by subscribers to the memorandum of association;

2)     Fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filling annual returns; and

3)     Payment of a civil penalty for late filing of accounts.


For How Long Can I Keep a Dormant Company Maintain its Status

The answer is simple, for as long as you want or need in order to protect your company name or if you are planning to start trading in the future, many business owners normally have 2 or more companies and while one of them might not be trading at the moment, there might be plans or ideas in order to make it productive. However, you must consider all the paper work and expenses involved – the financial statements, the annual return and a fee should be submitted on an annual basis.


Can I Close a Dormant Company?

Yes, if you decide that you no longer require the company, you can always ask to be removed from the company house register; there are two ways in which you can do this:

1)     Voluntary Liquidation: you can apply for this when the company doe have liabilities, debts or any affair to be taken up.

2)     Voluntary Dissolution and Striking-Off: this is most simple as it doesn’t involve any insolvency transactions and can be done if the entity doesn’t have any debts.


Other related articles that might help you:

Problems with Overtrading and Business Growth: A company growing too big in a short period of time might seem to be working effectively; however, this could be the first sign of overtrading; a business problem that could eventually close down your business venture.

How to Reduce Spending and Save Money: Regardless if you are a small, medium or large company; there are many ways in which you can save money by reducing the spending, this will eventually make you more profitable by being more effective.