The Ministry of Corporate Affairs (MCA) has taken several measures in the recent past to make business and life easier for businesses. These included decriminalization of various provisions of the Companies Act, 2013 and the LLP Act, 2008, extension of quick mergers to start-ups, incentives to set up One Person Companies (OPCs), etc. Earlier, the definition of “small companies” under the Companies Act, 2013 was revised by raising their thresholds for paid-up capital from “not exceeding Rs.50 million” to “not exceeding Rs.2 million” and turnover from “not exceeding Rs.2 million” to “not exceeding Rs.20 million”.
This definition has now been further revised by increasing these thresholds for paid-up capital from “not exceeding Rs. 2 crore” to “not exceeding Rs. 4 crore” and a turnover of “not exceeding Rs. 20 million” to “not exceeding Rs. 40 million”. Small companies represent the entrepreneurial aspirations and innovation capabilities of thousands of citizens and contribute significantly to growth and employment. The Government has always been committed to taking measures that create a more favorable business environment for law-abiding companies, including reducing the compliance burden on those companies.
Some of the benefits of reduced compliance burdens as a result of the revised definition for small companies are as follows:
> There is no need to prepare a statement of cash flows as part of the financial statements.
> The advantage of preparing and submitting an abbreviated annual return.
> Mandatory auditor rotation is not required.
> The auditor of a small company need not state in the auditor’s report the adequacy of internal financial control and its operational effectiveness.
> Holding only two board meetings per year.
> The company’s annual return can be signed by the company’s executive or, where there is no company secretary, by the company’s director.
> Smaller penalties for small businesses.
