Revised definition of ‘Small Company’

‘Small company’ was a new concept introduced under the Companies Act, 2013. It was aimed at reducing the compliance burden of companies which control less economic resources.

In tune with the announcements made during the presentation of Union Budget 2021, the Central Government has increased the limits of eligibility for categorisation as a ‘small company’ by the Companies (Specification of Definitions Details) Rules, 2014.

The original maximum permissible limits as contained in Clause (85) of Section 2 of the Companies Act, 2013 were paid-up capital of INR 50 lakhs and turnover of the preceding year of INR 2 crores.

The said limits are raised to paid-up capital of INR 2 crores and turnover of the preceding year of INR 20 crores. The revised limits are effective from 1st April, 2021.

Some of the main benefits of being a ‘small company’ are:

• Abridged Board’s Report
• Abridged Annual Return in Form MGT-7A
• Only 2 meetings of Board of Directors every year (rather than 4)
• Easier mergers and amalgamations under Section 233
• Half the penalty for any contraventions of the Companies Act, 2013