MCA has vide its notification dated 1st February, 2021 changed the definition of small company in the Companies Act, 2013.
Now small company will be a company which has a paid up share capital and turnover of not more than Rs.20 million and Rs.200 million respectively. Hitherto the limits were Rs.5 million and and Rs.2 million respectively.
Note that both the conditions should be satisfied for a company to be a small company ie.. the paid up share capital should not cross Rs.20 million AND the turnover should not cross Rs.200 million. If a company’s paid up share capital is more than Rs.20 million but the turnover is less than Rs.200 million, then it will still remain a small company.
There are a few benefits of a company being a small company under the companies act, 2013 such as
- No need to prepare Cash flow statement as part of financial statement.
- Where other companies require providing details of remuneration to directors and key managerial personnel, small companies are required to provide details of the only aggregate amount of remuneration drawn by directors in its Annual Return.
- Mandatory rotation of auditor not required.
- An Auditor of small companies is not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report.
- Hold only two board meetings in a year.
- Annual Return of the company can be signed by the Company Secretary, or where there is no company secretary, by a single director of the company.
- Lesser penalties for Small Companies.
- Lesser filing fees for Small Companies.
The lesser filing fees for small companies has not been operationalised yet, but it is expected that MCA will bring that soon.