The Ministry of Corporate Affairs (MCA) has revised the definition of small companies under the Companies Act 2013 by increasing their thresholds for paid-up capital to ‘not more than INR 4 Cr’ and turnover TO ‘not exceeding INR 40 Cr’.

According to a recent Ministry of Corporate Affairs (MCA) notification, any company with a paid-up capital of up to ₹4 crores and turnover of up to ₹40 crores would be considered a small company.

Small companies enjoy certain privileges and exemptions. They are not required to include cash flow statements in their financial reports, hold only two board meetings a year instead of at least four for others, and do not have to rotate auditors every five years. They can file abridged annual returns, which the company secretary or director can sign. Most of the statutory documents of small companies needn’t be signed by a practising professional such as a chartered accountant. Small companies enjoy a lenient compliance regime.

The doubled limit from the April 01 notification (which stated the paid-up capital to Rs 2 crore and turnover not over Rs 20 crores for classifying as a small company) should allow a much larger number of companies to be considered small companies for light-touch compliance. 

The measures are part of the Central Government’s efforts to make the compliance regime easier for companies. Last year, the government decriminalised several Companies Act violations, providing a more lenient regime.

Due to the increase in the monetary limits for defining a small company, the requirement of pre-certification of practising professionals for certain forms will be reduced for such companies. Instead, a self-certification would be sufficient.

The move is aimed at helping create a better business environment.

“Small companies represent the entrepreneurial aspirations and innovation capabilities of lakhs of citizens and contribute to growth and employment in a significant manner. The government has always been committed to taking measures which create a more conducive business environment for law-abiding companies, including reduction of compliance burden on such companies.” the MCA said in a press release.