Gamut of Privileges to a Small Company
Before the amendment, the definition of a small company, as per Section 2(85) of the Companies Act 2013, was,
‘‘small company’’ means a company, other than a public company,—
(i) paid-up share capital (both equity and preference) 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; or
(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;
Now Ministry of Corporate Affairs (MCA) has amended the Companies (Specification of definition Details) Rules, 2014 w.e.f. 1st April 2021 to give effect to higher monetary limits for a private company to be considered as a small company. The limit of maximum Paid-up capital has been increased from Rs. 50 Lakh to Rs. 2 Crores and the maximum turnover limit has been increased from Rs. 2 Crores to Rs. 20 Crores to be a small company.
So from 1st April 2021, a small company would be one which satisfies both the below mentioned conditions for the immediately preceding year:
i. Paid-up capital is upto Rs. 2 Crores, and
ii. Turnover is upto Rs. 20 Crores
However, an important point to note here is that these changes are effective from 1st April 2021 and nothing of these shall apply up till Financial Year 20-21. That is to say, the company will have to abide by all the compliances (like preparation of cash flow statement, issue of audit report, and filing of annual forms with ROC) just like a normal company i.e. other than a small company for Financial Year 2020-21
Following companies have still been excluded from being a small company:
What does this change mean for companies?
This minute change in definition would enable more businesses functioning under the constitution of a company to fall under this definition and enjoy a number of privileges and exemptions provided to such companies to further enhance ease of doing business.
An example in a tabular form would make things a little more clear:
|Bxe Pvt Ltd||Paid up capital||Turnover||Whether a small company?|
A small company can enjoy the following benefits:-
Following are the matters included in Board’s Report of a Small Company, based on the standalone financial statement of the company, which shall be in abridged form and contain the following:
a. Web address if any, where annual return referred to in Section 92 of the Companies Act has been placed
b. Number of meetings of the Board
c. Directors Responsibility Statement under Section 134
d. Details in respect of frauds reported by auditors under Section 143(12), other than those reportable to the Central Government
e. The state of the Company’s Affairs
f. The financial summary
g. Material changes from the date of closure of the financial year in the nature of the business and their effect on financial position
h. Details of directors who were appointed/resigned during the year
i. Particulars of the contracts/arrangements with related parties referred to in Section 188 of the Companies Act 2013.
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