Special Offer for Chartered Accountant

Tally Automation
Apr 12, 2024

Sleeping Beauty or Sleeping Giant? The Truth About Dormant Companies and Dormant Accounts

Ankit Virani



Ever had a brilliant business idea but haven't gotten around to launching it yet? Or maybe you have an old bank account tucked away somewhere that you haven't touched in years?

These scenarios deal with the world of dormant companies and dormant accounts. Dormant companies are registered businesses that are currently on hold and not actively generating income. Dormant accounts are bank accounts that haven't seen any activity for an extended period.

Both can be useful tools, but there are advantages and disadvantages to consider. Dormant companies can help you hold onto a business idea or asset for the future, while dormant accounts can keep your financial options open. However, both require some upkeep to avoid any unexpected consequences down the line.

In this blog post, we'll be diving deeper into the world of dormant companies and dormant accounts. We'll explain what they are, the benefits and drawbacks of each, and how to manage them effectively. So, whether you're a budding entrepreneur or simply someone with a forgotten bank account, keep reading to learn everything you need to know!

Dormant Companies

A. Definition and Purpose

Imagine a company existing but hitting the pause button on its operations. That's essentially what a dormant company is. It's a legally registered business entity that's not currently conducting any business activities or incurring significant financial transactions. This means no buying or selling products, offering services, or generating income.

So, what qualifies a company as dormant? Typically, it boils down to the level of activity in its accounts. There shouldn't be any major transactions happening, beyond things like minimal fees or filings required by law.

There are two main ways a company can become dormant:

  • Voluntary dormancy: This is a planned decision by the company owners. They file the necessary paperwork and potentially pay a fee to officially classify the company as dormant according to governing regulations.

  • Inactive dormancy: A company can also slip into dormancy unintentionally. If it hasn't been operating for a specific period (often two years) and hasn't filed required documents like tax returns, it might be classified as dormant by default.

B. Maintaining a Dormant Company

Even though they're not actively operating, dormant companies aren't entirely free and clear. There are still some compliance requirements to maintain their good standing:

  • Filing Documents: Depending on your location, there might be specific documents you need to file periodically to keep the company's registration active. These could be reports or confirmations with the government agency responsible for company registration.

  • Fees: Some jurisdictions might have minimal fees associated with maintaining a dormant company status.

Reactivating a Dormant Company

The good news is that a dormant company isn't stuck in that state forever. If you decide to revive your business idea and start operations, you can usually reactivate the company. However, this process might involve additional steps and potential fees depending on your local regulations. We'll explore this process in more detail later in the blog.

Dormant Accounts

A. Definition and Inactivity Period

We've all rummaged through old drawers and stumbled upon forgotten treasures. Bank accounts can sometimes fall into that category. A dormant account is a bank account that hasn't seen any activity for an extended period. The exact timeframe for dormancy can vary depending on the bank, but it's usually several years (often between 12-24 months) with no deposits, withdrawals, transfers, or even check activity.

There can be a few unwelcome consequences associated with a dormant account:

  • Restricted Access: If your account becomes dormant, the bank might restrict your ability to access the funds. You might need to go through a verification process to re-activate the account and regain full control.

  • Fees: Some banks charge inactivity fees for dormant accounts. These fees can slowly eat away at your account balance.

  • Escheated Funds: In some cases, if an account remains dormant for an extended period (often exceeding five years) and the bank is unable to locate the owner, the funds might be escheated. This means the money is turned over to the state.

B. Avoiding a Dormant Account

The good news is that keeping your bank account active is quite simple:

  • Minimal Transactions: Even a small deposit or withdrawal every few months can keep your account active. Setting up a recurring transfer of a fixed amount can be an easy way to achieve this.

  • Update Your Contact Info: Make sure the bank has your current contact information, including mailing address and email address. This ensures you receive important notifications about your account, including any dormancy warnings.

Alternatives to Dormant Accounts

If you have an old account you truly don't need anymore, consider closing it to avoid any potential fees or complications. Just make sure you withdraw any remaining funds before initiating the closure process. By following these simple tips, you can keep your bank accounts active and avoid any unexpected consequences associated with dormancy.


How long can a company remain dormant?

There's usually no set limit on how long a company can stay dormant. As long as you meet the compliance requirements (filing documents, fees), you can keep the company inactive for an extended period. However, it's always best to consult with a professional to understand the specific regulations in your area.

What if I accidentally let my company become dormant?

Don't worry! In most cases, you can reactivate an inactive dormant company by following the proper procedures and potentially paying any outstanding fees.

How will I know if my account is dormant?

Most banks will send you a notification before your account becomes dormant. This notification will typically outline the timeframe for inactivity and any potential consequences.

How can I recover funds from an escheated account?

The process for recovering escheated funds can vary depending on your state. You'll likely need to contact your state's unclaimed property division to initiate the claim process.

Recent Blogs