The new definition of a Small Company as per section 2(85) of the Indian Companies Act, 2013 - a small company means a company that meets the following criteria:
1) Paid-up capital of the company should not exceed INR 4 Crores (₹40 Millions); and
2) Turnover of the company should not exceed INR 40 Crores (₹400 Millions).
However, it is essential to note here that the following companies, even though they meet both of the above conditions, are not eligible to qualify as a small company -
i) A public company
ii) A holding company
iii) A subsidiary company
iv) Company registered under section 8 of the Indian Companies Act, 2013.
v) A company that is governed by any particular act.
Benefits of Revised Definition of Small Companies:
🔖 1) No need to prepare cash flow statement as part of financial statement.
🔖 2) Advantages of preparing and filing an Abridged Annual Return.
🔖 3) The small company will not be required to have the compulsory rotation of auditors.
🔖 4) An Auditor of a small company does not need to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report.
🔖 5) The small company can hold only two board meetings in a year.
🔖 6) Annual company returns can be signed by the company secretary, or where there is no company secretary, by a company director.
🔖 7) In addition, small companies are subject to fewer penalties.
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