Section 2 (85) of Companies Act, 2013 defines limits for the identification of Small Company. Limits are as follows:
- Paid-Up Capital: 50 Lac to 10 Crore
- Turnover: 2 Cr to 100 Cr.
Gives power to Government to prescribe such higher amount within the specified limits.
By using aforesaid power (powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013), Central Government has prescribed limit by inserting new clause (t) in the Companies (Specification of definition details )Rules,2014 .
Now the new limit for Small Company effective from 01/04/2021 is
- Paid-Up Capital NOT EXCEED Rs. 2 Cr.. AND
- Turnover NOT EXCEED Rs. 20 Cr. (as per profit and loss account for the immediately preceding financial year)
You should be clear that new limit of Small company is effective from 01st April, 2021 that means, New limit applicability is for Financial Year 2021-22 rather than Financial Year 2020-21.
For Financial Year 2020-21, Small Company will be identified as per previous definition provided under section 2(85) of Companies Act, 2013. or
We can say before insertion of new clause t under Companies (Specification of definition details )Rules,2014, Small Company Limit was for:
- Paid Up Capital Not Exceed 50 lac rupees AND
- Turnover Not Exceed 2 Crore Rupees (as per profit and loss account for the immediately preceding financial year).
For being Small Company , a Company needs to fulfill following conditions also:
Company Should not be
- A Public Company
- A holding company or a subsidiary company
- A company registered under section 8
- A company or body corporate governed by any special Act
Annual Return for Small Company
Form for Annual Return MGT-7 is changed for Small companies with the amendment of Rule 11 of the Companies (Management and Administration) Rules, 2014 w.e.f 5th March, 2021.
The Amended Rule 11 (1)of the Companies (Management and Administration) Rules, 2014 w.e.f 5th March, 2021 is:
(1) Every company shall file its annual return in Form No.MGT-7 except One Person Company (OPC) and Small Company. One Person Company and Small Company shall file annual return from the financial year 2020-2021 onwards in Form No.MGT-7A.]
It means Annual Return filing for Small companies will be done in Form No.MGT-7A for financial Year 2020-21.
Relief to Small Companies
1. Cash Flow Statement
As per proviso of Rule 40 of Section of companies Act, 2013, Small company does not need to maintain Cash Flow Statements.
2, Internal Financial Controls With Reference To Financial Statements
Clause (i) of Sub-Section (3) of Section 143 Shall not apply to a Small company so, they do not required to maintain internal financial controls with reference to financial statements.
3, Board Meetings
Small Company have to hold only one meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings is not less than ninety days.
4. Relaxation in penalties
As Per Section 446B of Companies Act, 2013,
Penalty payable for non-compliance of any of the provisions of this Act by a small company, or
- by any of its officer in default, or
- any other person in respect of such company,
- then such company, its officer in default or any other person, as the case may be,
- shall be liable to a penalty not more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be.
5. Relaxation in disclosure of Board report
Rule 8 of Companies Account Rules, 2014 is not applicable on Small companies. Small Companies have to follow Rule 8 A of the said rule for Board Report disclosures.
Source: Companies Act,2013 and rules made thereunder.
Tags :corporate law