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Small Company - Applicability and Benefits

Small Company – Applicability and Benefits


INTRODUCTION & APPLICABILITY

Definition of Small Company under Companies Act, 2013 amended vide Finance Bill 2021 has been made effective from 1st April, 2021.  

Amended definition of small companies as per Section 2(85) of the Companies act, 2013 is:  

“Small company means a company, other than public company if both conditions are fulfilled:  

  • It has a paid up share capital less than INR 2 Crores (previously 50 Lakhs) and,  

  • It has an annual turnover less than INR 20 Crores (previously 2 crores).   

But following companies are not small company even though they comply with above 2 conditions:   

  • a holding company or a subsidiary company;  

  • a company registered under section 8 of Companies Act, 2013 (Not for profit organization-NGO)  

  • a company or body corporate governed by any special Act. 

Note: Paid up share capital and Turnover shall be of previous financial year as per the latest audited financial statements.   

Example: To check the applicability of a Small Company for F.Y. 2021-2022 the Paid up share capital and Turnover as on 31st March, 2021 needs to be checked.  

 

BENEFITS / EXEMPTIONS ENJOYED BY SMALL COMPANIES

Sr. No. Section Exemptions / Benefits to Small Companies
1 2(40)

No need to include Cash Flow Statement as part of its financial statement.

Note: Since applicability is from 1st April, 2021, the Financial statements as on 31st March, 2021 shall include Cash Flow Statements, unless it qualifies as a small company as per the old definition.

2 92

Annual Return to be signed by a single director of the company. No signature of Company secretary is required for filing the form.

The Annual Return now needs to be filed in a new Abridged form MGT-7A.

3 134

Board report shall be in Abridged form.

4 143

No additional report to be obtain from Auditors for “Internal Financial Controls for financial statements” and “Companies Auditors (Report) Order [CARO]”.

5 173

To hold Minimum 2 board meetings in a calendar year, i.e. one Board Meeting in each half of the calendar year with a minimum gap of ninety days between the two meetings.

6 233

Merger and Amalgamation can be carried out under Fast Track mode i.e. without the approval of NCLT unlike normal court procedures.

7 446B

Penalty on Companies and officers in default for below stated noncompliances shall be upto half of the penalty prescribed for failure.

  • Filing Annual Return [section 92(5)],
  • Filing resolutions or agreements [section 117(2)] or
  • Filing Annual Accounts [section 137(3)].

   

Small Company - Applicability and Benefits
Articleship at GBCA