MCA Revises Threshold for Paid
Up Capital of “Small Companies”
·
Latest Revision to Facilitate Ease of
Doing Business further and Reduce Compliance Burden on “Small Companies”
The Ministry of Corporate
Affairs (MCA) has taken several measures in the recent past towards ease of doing
business and ease of living for the corporates.
These included decriminalisation of various provisions of the Companies Act,
2013 & the LLP Act, 2008, extending fast track mergers to start ups, incentivising
incorporation of One Person Companies (OPCs) etc. Earlier, definition of “small
companies” under the Companies Act, 2013 was revised 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”. This
definition has, now, been further revised by increasing such thresholds 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”.
Small companies represent
the entrepreneurial aspirations and innovation capabilities of lakhs of citizens
and contribute to growth and employment in a significant manner. The Government
has always been committed to taking measures which create a more conducive business
environment for law-abiding companies, including reduction of compliance burden
on such companies.
Some of the benefits
of reduction in compliance burden as a result of the revised definition for small
companies are as under:
·
No need to prepare cash flow statement as part of financial
statement.
·
Advantage of preparing and filing an Abridged Annual
Return.
·
Mandatory rotation of auditor not required.
·
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.
·
Holding of 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 director of the company.
·
Lesser penalties for small companies.
The relevant notification issued by the
Ministry of Corporate Affairs is available on the Ministry’s website at the following
link:
https://www.mca.gov.in/bin/dms/getdocument?mds=tiMs9IFJ8xuPm%252B%252Foxc6fUw%253D%253D&type=open