MCA revises threshold for “small companies”

Earlier, the 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 crores” to “not exceeding Rs. 4 crores” and turnover from “not exceeding Rs. 20 crores” to “not exceeding Rs. 40 crores”.

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 a 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.
• The 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