26 September 2022

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Ministry of Corporate Affairs revises threshold for paid up capital of “small companies”


The Central Government amends the Companies (Specification of Definition Details) Rules, 2014. These rules may be called Companies (Specification of definition details) Amendment Rules, 2022. Earlier, definition of “small companies” under the Companies Act, 2013 was revised by increasing their thresholds 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”. This definition has, now, been further revised by increasing such 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”. 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.

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.

Some of the benefits of reduction in compliance burden as a result of the revised definition for small companies are as under:

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

b. Advantage of preparing and filing an Abridged Annual Return.

c. Mandatory rotation of auditor not required.

d. 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.

e. Holding of only two board meetings in a year.

f. 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.

g. Lesser penalties for small companies.

Tags : Definition Amendment Paid-up capital

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