The Ministry of Corporate Affairs (MCA) on Thursday revised the definition of small companies by increasing the threshold for paid-up capital and turnover enhancing the ease of doing business and ease of living for the corporates.

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“This definition (of small companies) 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,” the ministry said in a statement.

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”.

According to the government, with the reduced compliance burden, “small companies” will not have to prepare cash flow statement as part of financial statement. They will have the advantage of preparing and filing an Abridged Annual Return.

Mandatory rotation of auditor is not required for small companies and 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.

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These companies need to hold only two board meetings in a year. The ministry added that the annual return of the small company can be signed by the company secretary, or where there is no company secretary, by a director of the company.

Also, fewer penalties are levied on small companies, according to the government statement.

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