In a bid to improve the Ease of Doing Business, the Ministry of Corporate Affairs (MCA) has revised the threshold for paid up Capital for small companies from ‘not exceeding Rs. 2 crores’ to ‘not exceeding Rs. 4 crores’ and turnover from ‘not exceeding Rs. 20 crores’ to ‘not exceeding Rs. 40 crore.’ taken several measures in the recent past towards ease of doing business and ease of living for the corporates.


Earlier, under the Companies Act, 2013 the definition of ‘small companies’ had been revised by increasing their thresholds for paid up capital from ‘not exceeding Rs 50 lakh’ to ‘not exceeding Rs 2 crore’ and turnover from ‘not exceeding Rs 2 crore’ to ‘not exceeding Rs 20 crore.’


This is one among the many steps taken by the Ministry, such as decriminalisation of various provisions of the Companies Act, 2013 & the LLP Act, 2008, extending fast track mergers to start ups, incentivising incorporation of One Person Companies (OPCs) etc.

Benefits of the revised definition for small companies are as under.

  • No need to prepare a cash flow statement as part of financial statement.
  • Advantage of preparing and filing an Abridged Annual Return.
  • Mandatory rotation of the auditor is not required.
  • An Auditor of a small company is not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report.
  • Holding of only two board meetings in a year.
  • Annual Return of the company can be signed by the company secretary, or where there is no company secretary, by a director of the company.
  • Lesser penalties for small companies.

The relevant notification issued by the Ministry of Corporate Affairs is available on the Ministry’s website at the following link:

Click to see the notification: Small Companies Notification

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