With effect from 15-09-2022, MCA revised definition of Small Company as a company whose turnover is <= 40cr and paid-up capital <=4cr (for the immediately preceding FY).
Few benefits/exemptions available to Small Companies under Companies Act, 2013 are:
- No need to prepare cash flow statement as part of financial statement – Sec. 2(40)
- Advantage of preparing Abridged Director report [Rule 8A of Companies (Accounts) Rules 2014] and Abridged Annual Return with less disclosures [Rule 11 of Companies (Mgmt and Admin) Rules 2014]
- Mandatory rotation of auditor not required – Sec. 139(2)
- 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 – Sec. 143(3)
- An Auditor of a small company need not report on CARO aspects – CARO 2020
- Holding of only two board meetings in a year (i.e. at least one meeting of the Board of Directors shall be conducted in each half of a calendar year and the gap between the two meetings is not less than 90 days) – Sec. 173(5)
- No requirement of pre-certification by Professionals for filing of Forms with ROC. For eg. as per Section 92, Annual Return of the company (MGT-7A) can be signed by the company secretary, or where there is no company secretary, by a director of the company.
- Lesser MCA filing fees – Rule 12 of Companies (Registration offices and Fees) Rules 2014
- Lesser penalties for small companies (i.e. not more than 1/2 of normal penalty subject to a maximum of Rs. 2 Lakh in case of a company and Rs. 1 Lakh in case of an officer who is in default or any other person, as the case may be) – Sec. 446B
- In case of merger between two small companies, simple fast-track merger procedure without applying to NCLT applies – Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rule, 2016.
Note:
- Please note that Small company does not include Holding company or subsidiary company or Sec 8 Company or listed company or public unlisted company.
- Compared to Companies Act 2013, definition of Small company under MSME Act, 2006 is bit different. A small enterprise is an enterprise where the investment in plant and machinery or equipment does not exceed ₹10 crore (WDV as per last ITR) and domestic turnover does not exceed ₹50 crore (as per GST return or ITR).