With the objective of providing relaxations to more companies in terms of reduced compliance requirements available to a ‘small company’ under the Companies Act, 2013 (CA2013) and for ease of doing business, the Ministry of Corporate Affairs (MCA) has amended the Companies (Specification of Definition Details) Rules, 2014. With this amendment, for the purposes of definition of “small company”, under Section 2(85) of CA2013, the maximum threshold for both paid up capital and turnover has been increased as follows
Pre-amendment threshold
Post amendment threshold
Paid Up Capital
INR 2 crore
INR 4 crore
Turnover
INR 20 crore
INR 40 crore
A few exemptions/ relaxations which are available to small company under CA2013 include:
Board Meeting frequency: A small company is deemed to have complied with the provisions of Section 173 of CA2013, if at least 1 meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the 2 meetings is not less than 90 days.
Signing of annual return: Annual returns of a small company is required to be signed either by the company secretary, or where there is no company secretary, by the director of the company.
Rotation of Auditors: Small companies are exempt from the condition laid in Section 139(2) of CA2013, which mandatorily requires the rotation of auditors every 5 years in case of individual auditors and every 10 years in case of a firm of auditors.
Preparation of financial statements: Small companies are exempted from preparing a cash flow statement for the financial year in its preparation of financial statements.
Lesser Penalties: Section 446B of CA2013 inter alia provides for lesser penalties to be imposed on small companies for non-compliance of any of the provisions of CA2013.
The scope of a “small company” has been amended vide the Companies (Specification of Definition Details) Amendment Rules, 2022 dated September 15, 2022 (available here).
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