Not to be confused with shell companies or skeleton companics, a dormant company is one which, though it is equipped to function, has no field of present operation and indulges in no accounting transactions which would require entries in its books or records other than the taking up of shares by a subscriber to the memorandum.
Where such a company is involved in no significant accounting transactions in a particular accounting period, the Companies Act 1985, following that of 1981, provides that where it is also entitled to the exemption of a small company and is not itself obliged to prepare group accounts. then it need not appoint auditors nor provide an auditors' report when filing its annual accounts. The directors must. however, file a statement with those accounts, to appear under their signatures on the balance sheet, to the effect that the conditions necessary to a dormant company prevailed throughout the financial year.
|Reference: The Penguin Business Dictionary, 3rd edt.|