The concept of “Small Company” has been introduced in the Companies Act, 2013. As per the act some companies are small companies based on their capital and turnover position for the purpose of providing certain relief/exemptions to these companies.As this concept is introduced because they do not require more compliances as large private and public companies require
Nowdays most startups ill be small companies so it will be great relief to them as it will decrease their expenses and they will have less burden of compliances
Most of the exemptions provided to a small company are same as that provided to a one person company.
As per sec 2(85)‘ and after The Companies (Removal Of Difficulties) Order, 2015.
small company’’ means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh rupees or such
higher amount as may be prescribed which shall not be more than five crore
rupees; and
(ii) turnover of which as per its last profit and loss account does not
exceed two crore rupees or such higher amount as may be prescribed which shall
not be more than twenty crore rupees:
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;
So as per above definition it can be concluded that
(a) A company will be Small company if it fulfill the both criteria of having paid up share 50 lakh or less than it and having turnover 2 crore or less than it
(b) Further, as per the definition of a small company, concept of small company does not apply to holding and subsidiary companies Thus even though both the holding company and subsidiary company may fulfill the capital and turnover requirement of a small company, they will still fall outside the purview of small company and accordingly the benefits and exemptions which are available to a small company cannot be applied to a company which is holding or subsidiary company.
(c) A company formed as sec 8 company for Charitable In India and having capital and turnover as per small company cannot cover itself in status of small company
Advantages to small company
Annual Return-As per sec 92 annual return shall be signed by director if there is no company secretary
Board meeting-As per section 174 small company are giving exemption and if they have hold one meeting in each half of a calendar year and the gap between the two meetings does not exceed less than 90 days than they have complied with this section
Cash flow statement-As per sec 2(40) small companies are exempted to attach cash flow statement with their financial statement
Rotation of auditors-As per sec 139 and rule (companies audit and auditors rules 2014 ) small companies are not require to rotate auditors
As per sec 233 The Act also provides for a simplified scheme of a scheme of merger or amalgamation between two small companies, without requiring the approval of Tribunal, i.e. with the approval of Central Government(Regional director) if they have no objection
A small company can be incorporated with the same procedure as private companies are incorporated
