MCA Amends Definition Of Small Company [Vanshika Aggrawal]



The Ministry of Corporate Affairs (MCA) vide its notification No G.S.R. 700(E) has further revised the limits of paid-up capital and turnover in the definition of small company.

The Paid up Capital has been increased from “not exceeding Rs 2 crore” to “not exceeding Rs 4 crore”. Furthermore, the turnover has been increased from “not exceeding Rs 20 crore” to “not exceeding Rs 40 crore”.

The revised limits are as follows:

  • Paid up capital : Rs. 4 Crore

  • Turnover: Rs. 40 Crore

Revised definition of small company as per section 2(85) of companies act, 2013 is as follows:

Small company means  a Private company which has:

  1. Paid up share capital up to Rs. 4 crore and

  2. Turnover up to Rs, 40 crore

Provided that nothing in this clause shall apply to :

  1. A holding company or a subsidiary company;

  2. A company registered under section 8

  3. A company or body corporate governed by any special act;

The latest revision will facilitate Ease of Doing Business further and reduce the compliance burden on “small companies”

The Ministry of Corporate Affairs (MCA) has taken several measures in the recent past towards ease of doing business and ease of living for the corporates. 

Earlier, definition of “small companies” under the Companies Act, 2013 was revised by increasing the threshold limit for paid up capital from “not exceeding Rs.50 lakh” to “not exceeding Rs.2 crore” and turnover from “not exceeding Rs.2 crore” to “not exceeding Rs.20 crore”. Now, this definition has further revised by increasing the threshold limit for paid up Capital from “not exceeding Rs.2 crore” to “not exceeding Rs.4 crore” and turnover from “not exceeding Rs.20 crore” to “not exceeding Rs.40 crore”.

Some of the benefits of the small company as a result of reduction in compliance burden due to the revised definition:

  • Provision of mandatory rotation of auditor not required.

  • Annual Return of the company can be signed by the company secretary, or where there is no company secretary, by a director of the company.

  • No need to prepare cash flow statement as part of financial statement.

  • Requirement of only two board meetings in a year.

  • An Auditor of a small company is not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report.

  • Advantage of preparing and filing an Abridged Annual Return.

  • Lesser penalties for small companies.

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