MCA: Amendment To The Definition Of Small Companies

Posted On - 14 October, 2022 • By - Manisha Singh

 On September 15th 2022, the Ministry of Corporate Affairs (MCA) issued notification G.S.R. 700(E) [1] to amend the Companies (Specification of Definition Details) Rules, 2014 in exercise of the powers conferred on the Central Government to make rules under Section 469(1) and Section 469(2) of the Companies Act, 2013.  

The Amendment 

Under this amendment, Rule 2(1)(t) of the Companies (Specification of Definition Details) Rules, 2014 has been amended, which has reference to sub-clause (i) and (ii) of Section 2(85) of the Companies Act, 2013. 

Section 2(85) of the Companies Act, 2013 defines a ‘small company’. Before the amendment, the paid-up capital limit for small companies was INR 2 Crores, and the turnover limit was INR 20 Crores. As per the amendment, companies with a paid-up capital limit of INR 4 crores and turnover limit of up to INR 40 Crores would be treated as ‘small companies’. 

Small companies have a lot of benefits such as: 

  • They don’t need to keep a cash flow statement. 
  • They do not have to rotate their auditors. 
  • They may hold only two board meetings in a calendar year, i.e., one board meeting in each half of the calendar year with a minimum gap of ninety days between the two meetings. 
     
    The amendment will allow a lot more companies to be under the ambit of a small company and such small companies will provide entrepreneurship, employment, and jobs as they are easier to run due to their numerous advantages over other corporations. Furthermore, the government has always been dedicated to adopting steps to improve the business environment for law-abiding companies, including reducing the compliance burden on such corporations.  

1 https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/notifications.html#