Centre revises definition of small companies to facilitate ease of doing business

The government has taken several measures in the recent past towards ease of doing business and ease of living for the corporations

PGurus Newsdesk

September 16, 2022

The government has taken several measures in the recent past towards ease of doing business and ease of living for the corporations

Threshold for paid-up capital of small companies has been revised

The Ministry of Corporate Affairs has revised the threshold for paid-up capital for small companies to facilitate the ease of doing business and reduce the compliance burden on small companies.

The Ministry said that the government has always been committed to taking measures that create a more conducive business environment for law-abiding companies, including reduction of compliance burden on such companies.

The government has taken several measures in the recent past towards ease of doing business and ease of living for corporations. These included decriminalization of various provisions of the Companies Act, 2013 & the LLP Act, 2008, extending fast-track mergers to startups, incentivizing incorporation of One Person Companies (OPCs), etc.

Earlier, the 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.

Some of the benefits of reduction in compliance burden as a result of the revised definition for small companies include ‘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’ and ‘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.

The benefits also include holding only two board meetings in a year, the 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, and lesser penalties for small companies.

[With Inputs from IANS]

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