Show the facts common to all parts of Q. 1
Case Study :
Background :
Swash Infra Limited, incorporated in 2021 under the provisions of Companies Act 2013 is presently engaged solely in infrastructure-related activities in line with its existing object clause. The company has built a strong market presence through high-quality products and robust post-sale services, resulting in consistent profits since inception. This operational success and evolving strategic outlook form the basis for the issues discussed in the subsequent paragraphs.
I.Name Change
Given its profitable operations, expanding business aspirations and also with the advice of one of the renowned astrologers the board of the directors of the company decided to change its name to reflect a broader business outlook.
The company passed a special resolution and filed an application with the Registrar of Companies (ROC) on 25 May 2026 for approval of a change in its name to Swaarna
Infra & Realty Limited. During examination of the application, the ROC noted that the company had not filed its annual return for FY 2024-25 in Form MGT-7, although the financial statements for the same year had been filed. The directors remain confident that the application will be approved.
II.Future Projects
Despite being profitable in the infrastructure sector, the promoters intend to diversify into the Renewable Energy Infrastructure business after three years. They have already developed certain intellectual properties for the proposed venture and also wish to purchase land now for use in the future project. However, the existing object clause of Swash Infra Limited does not permit such activities or holding assets relating to the renewable energy sector, and the promoters do not wish to alter the object clause at this stage. They also confirm that no accounting transaction or business activity relating to the proposed project will be undertaken at present and till the projects become operational. The promoters, however want the intellectual property and the proposed land to be held under a corporate structure rather than in their personal names and therefore seek advice from the Practising Company Secretary (PCS) on how this may be achieved without altering the existing object clause.
III.Status as a Listed Company
The Board of Directors is considering issuing non-convertible redeemable preference shares (NCRPS) to augment financial resources. During preliminary discussions, the Company Secretary suggested that the company could list the proposed issue of NCRPS on the National Stock Exchange of lndia (NSE). The Board seeks a legal opinion from the PCS on whether such a listing would confer the status of a “listed company”.
IV.Threat of a Trade Union
A recognised trade union of the company is on strike, alleging unfair labour practices, including non-payment of bonus despite high profits. A workman of the union has created a video disk containing material that the company considers could be potentially defamatory and has also threatened to release it on social media. The Managing Director has instructed the Company Secretary to explore the possibility of obtaining legal measures to restrain the union and workmen from releasing the video.
V.CARO 2020
For the financial year ending 31st March 2026, the statutory auditor submitted the Companies (Auditor’s Report) Order, 2020 (CARO 2020) report. In relation to physical verification of inventory, the auditor noted that :
•The management has not conducted physical verification of inventory at reasonable intervals.
•No proper treatment of discrepancies of 10% or more has been made by the company.
The auditor did not provide any explanation for these observations. The Board seeks clarification on the applicability of CARO 2020 to the company and whether the auditor’s report complies with the reporting requirements, particularly in the light of the remarks on inventory verification.
Based on the information provided above and with reference to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, answer the following :
(b)As a Practising Company Secretary, do you consider a dormant company mechanism would provide a solution to the issue raised by the promoters on how they can provide a corporate shield for the intellectual properties and the land linked to the future renewable energy projects without altering the existing object clause of Swash Infra Limited.
As per Section 455 of the Companies Act, 2013 read with Companies (Miscellaneous) Rules, 2014, where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property without having any significant accounting transaction, such a company or an inactive company may make an application to the ROC in such a manner as may be prescribed for obtaining the status of a dormant company. A dormant company may either be a public company or a private company or a one-person company (OPC).
For the above purposes, ‘inactive company’ means a company which:
(a)has not been carrying on any business or operation; or
(b)has not made any significant accounting transaction during last two financial years; or
(c)has not filed financial statements and annual returns during the last two financial years.
Analysis and Conclusion:
Yes. A dormant company mechanism would provide a solution by providing a corporate shield for the intellectual properties and the land linked to future renewable energy projects. Since the existing company’s object clause does not permit undertaking the proposed future projects, it cannot provide corporate protection for the related intellectual property and land. Accordingly, I, being a Practising Company Secretary, would advise the promoters to incorporate a new company and, upon incorporation, apply to the Registrar for dormant status under Section 455 of Companies Act, 2013, as the business activities will commence only after three years and no significant accounting transactions are expected. This approach ensures a corporate shield for holding the asset for its usage at a future date.
Source: ICSI Guideline Answers, June 2026, Q. 1(b) (Syllabus 2022).