The Ministry of Corporate Affairs (MCA) has further revised the definition of “small companies” under the Companies Act, 2013.
- The MCA has increased the thresholds 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”.
- Small companies represent the entrepreneurial aspirations and innovation capabilities of lakhs of citizens and contribute to growth and employment in a significant manner.
Benefits to small companies
Some of the benefits of reduction in compliance burden as a result of the revised definition for small companies are as under:
- No need to prepare cash flow statement as part of financial statement.
- Advantage of preparing and filing an Abridged Annual Return.
- Mandatory rotation of auditor not required.
- 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.
- Holding of only two board meetings in a year.
- 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.
- Lesser penalties for small companies.
