Revision in the definition of small company
In a move to ease the compliance burden on smaller businesses, the Ministry of Corporate Affairs (MCA) has recently updated the definition of a “small company” through Notification No. G.S.R. 700(E) dated 15th September 2022. This amendment revises the thresholds for paid-up capital and turnover, making it easier for more companies to qualify for the benefits reserved for small businesses.
What Are the New Thresholds ?
Under the new rules, a company will now be considered a small company if it meets both the following criteria:
- Paid-up capital: Up to ₹4 crore (previously ₹2 crore) &
- Turnover: Up to ₹40 crore (previously ₹20 crore)
This expansion of the thresholds means that a significant number of businesses that were previously not considered “small” will now fall under this category. As a result, they can avail themselves of various exemptions and simplified compliance requirements.
Small companies enjoy certain exemptions such as :
- small companies not required to prepare cash flow statements,
- small companies can prepare annual report in abridged form i.e. MGT-7A
- only 2 board meetings needs to conduct in a calendar year
- various E-forms can be signed by the directors only and no need o professionals certification.
- reduced penalties under the Company Act 2013
- Auditors not require to report on internal control over financial reporting etc.
- CARO reporting is not applicable to small companies.
