The MCA has changed the definition of Companies 'Small Companies', to Rs. Has raised the limit for paid-up capital. 50 lakhs to Rs. 2 crores.

The Ministry of Corporate Affairs has announced to change the definition of 'small company'. This change was proposed by Finance Minister Nirmala Sitharaman while presenting the Union Budget on Monday, in which the paid up capital increased to 2 crore and business finance to 20 crore. The changes will come into effect from 1 April 2021.

The notification reads, ". . . . . 2. In Companies (Statement of Definitions) Rules, 2014, in rule 2, in rule 2, in sub-rule (1), after clause (s), the following clause shall be inserted, namely: -

"(T) For the purposes of sub-clause (i) of section 2 of the Act and clause (85) of sub-clause (ii), the paid-up capital and turnover of the small company shall not exceed two crore rupees and Rs. Twenty crores respectively. ".

The Companies Act 2013 provides some benefits to small companies including: -

  • The small company is required to hold only 2 board meetings in a calendar year i.e. one board meeting in each half of the calendar year.
  • In the case of a small company, the annual return can be signed by the company secretary alone or if there is no CS, only by a director.
  • A small company is not required to maintain a cash flow statement as a part of its financial statements.
  • A small company is exempted from the requirement of this clause. Change your auditor by rotation as per section 139 (2) of the Companies Act 2013.
  • A small company is not required to report in its audit report about internal financial control and operational effectiveness of the company.
  • In the case of a small company, the Companies Act prescribes a lesser penalty.
  • With the newly notified change in definition, more companies can now enjoy these benefits to make it easier for these companies to do business.

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