Sponsored
    Follow Us:
Sponsored

In the Union Budget 2021, Hon’ble FM Smt. Nirmala Sitharaman Ji proposed to revise the definition of small company under the Companies Act, 2013 (the Act), with a view to facilitate ease of doing business and reducing compliance burden thereof.

– Accordingly, the MCA notified a new set of Rules, Companies (Specification of Definitions Details) Amendment Rules, 2021 to amend the existing Companies (Specification of Definitions Details) Rules, 2014 (the Rules) vide Notification No. G.S.R. 92(E). dated, 1st February, 2021.

– With this amendment, a new clause (t) was inserted in Rule 2(1), to provide for amendment in the definition of small company.

The clause reads as follows:

“(t) For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees two crores and rupees twenty crores respectively.”

– However, the definition under section 2(85) of the Act, is itself not amended by the Ministry.

– The amendment rules came into force w.e.f. 1st April, 2021.

Existing Definition:

Section 2(85): 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 ten crore rupees and

(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred 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;

Amended Definition:

Keeping in view the insertion of clause (t) in Rule 2(1) of the Rules, it can be said that, for the purpose of bringing into effect the amended provisions, the definition under section 2(85) read along with the Rules shall be referred to, in the following manner:

small company means a company, other than a public company—

(i) paid-up share capital of which does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees and

(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed twenty crore rupees or such higher amount as may be prescribed which shall not be more than one hundred 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;

Criteria Old New
Paid-up share capital 50 lakhs 2 crores
Turnover 2 crores 20 crores

CONCLUSION: After considering the afore-mentioned points in general and date of applicability of the amended provisions in particular, it can be concluded that the amended definition is applicable from F.Y. 2021-22 onwards.

The author can also be reached at [email protected].

Sponsored

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

One Comment

Leave a Comment

Your email address will not be published. Required fields are marked *

Sponsored
Sponsored
Ads Free tax News and Updates
Sponsored
Search Post by Date
December 2024
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
3031