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Saturday, July 21, 2018


The concept of Small Companies has introduced by Companies Act, 2013. As per Section 2 (85) of Companies Act, 2013 Small Company means a company, other than a public company —

(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees or

(ii) Turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:

(iii) It is not a holding company or a subsidiary company

(iv) The company is not registered under section 8 i.e. it should not be a NPO

(v) A company or body corporate which is not governed by any special Act.

This mean that any Company whose paid up capital does not exceed 50 lakh or such higher amount as may be prescribed but it should not be more than 5 crore or turnover as per its last audited profit and loss does not exceeds 2 crore or such higher amount as may be prescribed but it should not be more than 20 crore.

A company which is eligible to be a small company in one particular year might not be eligible to have the status of a small company in the subsequent year. This status is determined on the basis of the Annual return which is filed after the end of every financial year. The status of Small company changes from time to time. This means that a benefit/exemption available to a small company in a particular year may not be available in the next year.

Benefits to Small Companies-

There are some exemptions and benefits which are allowed to small Companies. These benefits are similar to the benefits which are available to one person company also-
1. There is no mandatory compulsion on small company to get its annual return be signed from Company Secretary. Annual return of small company can be filed with the signature of Company Secretary alone or by director signature only.

2. Companies other than small companies are required to file cash flow statement with its financial statement, Small Companies are not required to file cash flow statement.

3. Small companies may hold only two board meetings in a year ie 1 board meeting in each half year. There should be minimum gap of 90 days in two board meetings.

4. The provision regarding mandatory rotation of the auditor or the maximum term of an auditor being 5 years in case of an individual and 10 years in case of a firm of auditors is also not applicable.

5. A new section has been notified by the ministry recently. As per new section there is a provision for fast track merger of small companies. Merger process between 2 or more small companies is to be approved on fast track basis. Such merger would require approval of ROC, Official liquidator, members holding at least 90% of total number of shares and majority of creditors representing 9/10th in value the creditors or class of creditors of respective companies indicated in a meeting convened by the company by giving a notice of twenty-one days along with the scheme to its creditors for the purpose, or otherwise approved in writing.

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