MCA widens scope of small companies; increases threshold limit for paid up capital and turnover

Notification No G.S.R. 700(E) dated 15-09-2022

In order to ensure ease of doing business and ease of living for the corporates, MCA has further revised the definition of Small companies. The Ministry of Corporate Affairs (MCA) had earlier revised the definition of “small companies” 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”.

The definition has been further revised by increasing such threshold 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.

As a result, now more companies would fall under the ambit of Small companies. It is a welcome move in improving the ease of doing business index. Revision in definition of small companies will further benefit more companies in reducing their compliance burden. Some of the relaxations that are enjoyed by the Small companies are listed hereunder:

(a) Exemption from the preparation of the cash flow statement as part of financial statement.

(b) Advantage of preparing and filing an Abridged Annual Return (i.e. MGT-7A)

(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) Exemption from the requirement of holding of minimum 4 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.

Click Here To Read The Full Notification