Ministry of Corporate Affairs has notified the Companies (Specification of definition details)
Amendment Rules, 2025, revising the financial criteria for determining a Small Company under
Section 2(85) of the Companies Act, 2013.
Before the said amendment-
A “Small Company” meant (subject to other exclusions) a company whose:
- Paid-up share capital ≤ ₹ 4 crore; and
- Turnover (in immediately preceding financial year) ≤ ₹ 40 crore
After the said amendment (effective from December 1, 2025)-
A company will now qualify as a Small Company if its:
- Paid-up share capital ≤ ₹10 crores, and
- Turnover ≤ ₹100 crores.
However, a Small Company excludes:
- Holding or a subsidiary company;
- Company registered under Section 8; or
- Company or body corporate governed by any special Act
Privileges and Exemptions for a Small Company
|
Section of Companies Act, 2013 read with applicable Rules framed thereunder |
Provision |
Privilege / Exemption |
|
Sec. 2(40) |
Definition of financial statement |
Cash Flow Statement not mandatory. |
|
Sec. 29 |
Issuance of securities only in demat form |
Not mandatory. |
|
Sec. 92(1) |
Annual Return |
(a) Only aggregate remuneration of directors to be disclosed. (b) Can be signed by CS, or Director if no CS. (c) Abridged annual return allowed as prescribed by Central Government (“CG”) |
|
Sec. 134(3A) |
Board’s Report |
Abridged Board’s Report allowed as prescribed by CG. |
|
Sec. 139 |
Appointment of auditors |
Small companies exempt from auditor rotation: |
|
Sec. 141(1)(g) |
Eligibility/disqualification of auditors |
The limit of 20 company audits excludes small companies. |
|
Sec. 143(3)(i) & 143(11) |
Auditor’s report / CARO |
Auditors need not report on Internal Financial Controls (IFC). |
|
Sec. 173 |
Board Meetings |
Only 2 board meetings/year required: |
|
Sec. 233 |
Fast-track merger |
Eligible for fast-track merger: |
|
Sec. 446B |
Lesser Penalties |
50% of normal penalty, subject to: |