MCA Expands Definition of Small Company: Updated Thresholds Announced
The Ministry of Corporate Affairs (MCA) has amended the definition of a Small Company under Section 2(85) of the Companies Act, 2013. The revised limits significantly increase the number of companies eligible for relaxed compliance.
Revised Definition of Small Company
A private company (other than holding, subsidiary, Section 8 companies, or those governed under special Acts) will now be treated as a Small Company if it meets both the following limits:
Paid-up Share Capital:
Earlier Limit: Up to Rs.4 crore
New Limit: Up to Rs.10 crore
Turnover:
Earlier Limit: Up to Rs.40 crore
New Limit: Up to Rs.100 crore
This amendment allows more MSMEs and growing businesses to benefit from simplified corporate compliance.
Key Benefits of Small Company Status
1. Simplified annual return in Form MGT 7A
2. No cash flow statement required in financials
3. Lower penalties for non-compliance
4. Only two board meetings per year
5. Reduced reporting and documentation requirements
6. Exemption from Applicability of CARO
7. Exemption from reporting on adequacy of internal financial controls and its operating effectiveness in auditor’s report
8. Rotation of Director is Not Mandatory.
Who Is Excluded?
Even if the following companies meet financial limits, they cannot be classified as small companies:
1. Public companies
2. Holding or subsidiary companies
3. Section 8 companies
4. Companies governed by special Acts
Takeaway:
The expanded limits align with India’s ease-of-doing-business reforms and reduce the compliance burden for a large segment of private companies. Businesses should reassess their eligibility and update their compliance framework accordingly.
You can access official Notification through below mentioned Link:
Disclaimer: This material and the information contained herein is intended for clients and other Chartered Accountants to provide updates and is not an exhaustive treatment of such subject. We are not, by means of this material, rendering any professional advice or services. It should not be relied upon as the sole basis for any decision which may affect you or your business.
