The Ministry of Corporate Affairs, in it’s
notification dated 1st February 2021, amended the definition of Small Company
in the exercise of power conferred to Central Government vide sub-sections (1)
and (2) of section 469 of the Companies Act, 2013. The Finance Minister in
Union Budget 2021-2022 had proposed to modify the changes to increase the limit
of Paid of share capital and Turnover of Small company.
Earlier the Paid up share capital of Small company
was upto 50 Lakhs Rs and Turnover was upto Rs. 2 crores.
After amendment of Companies (Specification of
Definitions Details) Amendment Rules, 2021:-
The limit of Paid up share capital has been increased
upto 2 crore rupees and Turnover has been increased upto 20 crore Rupees.
|
Particulars |
Earlier |
After
Amendment |
|
Paid
up share capital |
Upto
50 Lakhs Rs. |
Upto
2 crore Rs. |
|
Turnover |
Upto
2 crores Rs. |
Upto
20 crores Rs |
When
shall it come into force?
They above amendment rule shall come into force on
the 1st day April, 2021.
What
are the Effects of Amendment?
After Amendment of Companies (Specification of Definitions Details) Amendment Rules, 2021, The private Companies which were having Paid up share capital exceeding 50 Lakhs Rupees but less than 2 crore Rupees, and Turnover Exceeding 2 crore Rupees but less than 20 crore Rupees were not classified as Small Companies, but after the MCA notification, such companies now fall under the purview of Section. 2(85) of companies Act 2013. (Small company).
Now
let us analyse the impacts of this Amendment:-
The exemption which were earlier available to
private companies having PUSC upto 50 lakhs Rupees and turnover upto 2 crore Rupees
will now be available to Private Companies whose PUSC is upto 2 Crore Rupees
And Turnover upto 20 Crore Rupees.
Increasing the threshold Limit would allow more companies
to take advantage of lesser compliance requirements.
Some of the Exemptions available to small companies
are as follows:-
Board
Meetings:-Small Company is required to hold only 2
Board meetings in a calendar year i.e. one board meeting in each half of
the calendar year.
Cash
Flow Statements:- Cash flow statement is not required to be maintained
by Small company as a part of its Financial Statements.
Annual
Return:. The Annual Return of every Small Company shall be
signed by the company secretary or where there is no company secretary by the
director of the company.
Rotation
of statutory auditors: The provision laid down in Section
139(2) of the Company Act 2013, , is not mandatory for small Company to comply
with .
Internal
Financial Controls: A small company is not required to
report on internal financial monitoring and the company's operational
effectiveness in the Audit report.
Remuneration
details: – As per section 92 of companies Act, 2013 private
companies are required to give a details of remuneration of directors and key
managerial personnel , but in small companies only “aggregate amount of
remuneration drawn by directors” is required in annual return.
Lesser
Penalties:-Lesser penalties for Small Companies under Section
446B of the Companies Act, 2013.
Due to this Amendment, Large number of Private
Companies can now take advantage of exemptions which will help them to focus
more on business prospects thereby saving time from cumbersome procedures in compliance.
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