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MCA Revises Definition of Small Companies to Facilitate Ease of Doing Business

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Govt revises definition of small cos_ reduced compliance burden for firmsThe Ministry of Corporate Affairs (MCA) has further revised the definition of “small companies” under the Companies Act, 2013 by raising the 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’.

CriteriaPrior to 2021Old (2021)New (2022)
Paid-Up CapitalRs. 50 lakhRs. 2 croreRs. 4 crore
TurnoverRs. 2 croreRs. 20 croreRs. 40 crore

  • This revision is intended to improve the “Ease of Doing Business” and reduce the compliance burden on “small companies.”
  • It will also allow more companies to qualify under the definition of small companies.


The Companies (Specification of Definitions Details) Rules, 2014 were amended by the MCA and took effect on April 01, 2021.

  • According to it, the definition of “small companies” under the Companies Act, 2013 was amended by raising the 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.”

Note: MCA is in-charge of implementing the Companies Law.

Key Revisions & Their Benefits

The revised definition for small companies includes the following benefits in terms of compliances:

  • A cash flow statement is not required as part of a financial statement.
  • An advantage of preparing and filing an Abridged Annual Return.
  • Mandatory rotation of the auditor is not required.
  • An auditor of a small company is not required to report on the adequacy of internal financial controls and the company’s operational effectiveness in the auditor’s report.
  • Only two board meetings can be held per year.
  • The company secretary or, in the absence of a company secretary, a director of the company, may sign the annual return of the company.
  • Less penalties apply to small companies.

MCA’s Measures Towards Ease of Doing Business

i.The measures taken by MCA towards ease of doing business and ease of living for corporates include decriminalisation of various provisions of the Companies Act, 2013 and the Limited Liability Partnership (LLP) Act, 2008.

ii.Additionally, it has extended fast track mergers to start ups, incentivizing the incorporation of One-Person Companies (OPCs), etc.

Recent Related News:

In August 2022, the Ministry of Corporate Affairs (MCA) approved the amalgamation of Bharat Gas Resources Limited (BGRL) with its parent company Bharat Petroleum Corporation Limited (BPCL). Bharat Gas Resources Limited (BGRL), incorporated in June 2018, is a wholly owned subsidiary of BPCL for handling the Natural Gas business. The scheme of amalgamation became effective on 16 August 2022

About Ministry of Corporate Affairs (MCA):

Union Minister – Nirmala Sitharaman (Rajya Sabha- Karnataka)
Minister of State (MoS)– Rao Inderjit Singh