All About Small Company

The concept of small companies in India is relatively new. It was introduced by the Companies Act 2013 to support better facilitation of small businesses.

Small Company – A private company is classified into a small company based on its size, i.e., paid-up share capital and turnover. In other words,such companies may be called small-sized private companies.

Applicable Section to Small Company : Section 2(85) of Companies Act,2013

Applicable Rules to Small Company: Companies (Specification of Definitions Details) Rules, 2014

Notification : the Central Government, vide Notification GSR 92(E) dated 01st February, 2021 which shall come into force on the 1st day of April, 2021.

Amendment in definition in Union Budget, 2021 I.e.

Applicability in terms threshold Limits fulfill Both the Conditions Earlier Amendment
Paid Up capital 50 Lakhs 2 Crores
Turnover  (as per  Last Profit & loss account ) 2 Crore 20 Crore

The above definition of a small company is not applicable to the following (i.e. a small company cannot be the below ones):

  • A public company
  • A holding company or a subsidiary company
  • A company registered under Section 8
  • A company or body corporate that is governed by any Special Act

All About Small Company Companies Act, 2013 Section 2(85)

Benefits of a small company as per Companies Act 2013

Section Particular Benefits
Proviso to Section 2(40) Cash flow statement Need not attach in Balance Sheet
Section 173(5) The number of board meetings Hold only 2 Board Meetings in a year and at least 1 Board meeting in each 6 month and gap not less than 90 days.
Section 92 Filing of Annual return can be signed by a CS or a director of the small company. Any private limited company which is not considered as a small company shall sign its annual return filing by a director and a company secretary both.
Certification by professional Not required to certify E – forms by professional
Section 139(2) Auditor Retire by Rotation No need to comply its exempted from this section
Section 152(6) Retire by Rotation No need to retire in every year in small co.
Internal Financial Report No need to report in annual report
Section 149(1) The number of directors In a small company need not to have more than 2 Directors on Board.
CARO, 2020 CARO The reporting requirements laid down under the Companies (Auditor’s Report)Order, 2020 for matters to be included in an auditor’s report do not apply to a small company.
Section 446B Lesser penalties Lesser penalty as compared to other company except Small Companies

A small company is not specifically registered with a different name and is merely a private company having less turnover and investment. But owing to the entitlement specializations under the Companies Act 2013,small companies are given some benefits and exemptions considering their small size. This is done as a measure to relieve small companies from the compliance burden and stringent regulations of the larger ones.

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Author – CS Jyoti Gohil, Company Secretary in Employment in Ahmadabad, Gujarat.

Disclaimer:  The whole article has been written with all reference to such relevant provisions and rules of respective act. I have been taken all accuracy for reliability of content also as per my knowledge. Therefore, Users of this information are expected to refer to the relevant existing provisions of applicable Laws. I assume no responsibility for the consequences of the use of such information

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