Friday, February 12, 2021



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.



After Amendment

Paid up share capital

Upto  50 Lakhs Rs.

Upto 2 crore Rs.


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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