Definition of a Small Company
Definition of a Small Company
The Finance Minister of India proposed a revision of the definition of a small company, as covered under section 2(85) of the Companies Act, 2013 while presenting the Union Budget 2021. The basic purpose behind the proposal was to provide the facility of ease of doing business and to reduce the compliance burden for a large number of companies.
Accordingly, the Ministry of Corporate Affairs notified the Companies (Specification of Definitions Details) Amendment Rules, 2021 vide notification dated 1st February 2021. The said amended rule notified amendment in the definition of a small company. The said amendment is made effective from 1st April 2021.
The present article briefly explains the new definition of a small company as an operative from 1st April 2021 and also covers the details of the new annual return to be furnished by the small company from the Financial Year 2020-2021.
Analyzing the new definition of a small company-
As per the new definition of small company provided under section 2(85) of the Companies Act, 2013, the small company means and covers the company which satisfies the following two conditions-
Condition 1 – Paid-up capital of the company should not exceed INR 2 Crores; and
Condition 2 – The turnover of the company should not exceed INR 20 Crores.
However, it is important to note here that the following companies, despite satisfying both the above conditions, are not eligible to qualify as a small company-
- A public company,
- A holding company,
- A subsidiary company,
- Company registered under section 8,
- A company that is governed by any special act.
Importantly, the above amendment is effective from 1st April 2021. Here it is needless to say that since the amendment is effective from 1st April 2021 (i.e., from the Financial Year 2021-2022). There will be no change in the filing requirement for the company, covered under the new definition, for the Financial Year 2020-2021.
Comparison of the new definition with the old definition of a small company-
The amendment to the definition of a small company has increased the maximum limit of both the paid-up capital and turnover. The limits are increased so that more and more companies can be covered within the definition of a small company making them eligible to avail the benefits of the small company available under the Companies Act, 2013.
A simple comparison of the new and old definitions of a small company is explained hereunder-
|Amendments||Old definition criteria new||New definition criteria paid|
|Paid-up share capital||Maximum paid-up share capital can be INR 50 Lakhs||Maximum paid-up share capital is increased to INR 2 Crores|
|Turnover||Maximum turnover for qualifying as a small company was INR 2 Crores||Maximum turnover for qualifying as a small company is increased to INR 20 Crores|
Amendment in the filing of an annual return-
Vide the Companies (Management and Administration) Amendment Rules, 2021, a new e-Form MGT-7A is introduced. Accordingly, from the Financial Year 2020-2021, the small company is required to file its annual return in the new e-Form MGT-7A.
Notably, the due date for filing the annual return in e-Form MGT-7A will be 60 days from the date of an annual general meeting. Accordingly, the late date for filing an annual return for the Financial Year 2020-2021 will be 29th January 2022.
Form filing fees will be as under-
|A company having authorized or nominal share capital||Corresponding filing fees|
|Less than INR 1,00,000||INR 200|
|INR 1,00,000 to INR 4,99,999||INR 300|
|INR 5,00,000 to INR 24,99,999||INR 400|
|INR 25,00,000 to INR 99,99,999||INR 500|
|INR 1,00,00,000 or more||INR 600|