Caro applicability

Pvt ltd 1176 views 6 replies

Computax

12 Points Joined July 2017

Hi Sir,

In a private limited company, the turnover is less than 10 lakh and reserves and surplus is more than 100 crore which is due to share premium securities. Whether CARO is applicable to this company.

While going through the CARO applicability, there are exemptions to small company which is defined below, but also there is mention of applicability for private limited companies. I have given the provision below.

In above case, whether it falls in small company and CARO not applicable as per clause (e) below ??

or CARO applicable since reserves & surplus more than 1 crore, so clause (f) is applicable and CARO is applicable???

(e) A small company under Section 2 (85) of the Companies Act, 2013.

(1) As per sec 2(85) of Companies Act 2013 small company means a company, other than a public company:

a) Paid up share capital of which does not exceed Rs. 50 lacs or such higher amount as may be prescribed which shall not be more than Rs. 5 crore, and

b) Turnover of which as per its last profit and loss account does not exceed Rs. 2 crore or such higher amount as may be prescribed which shall not be more than Rs. 20 crore.

(2) The following company shall not qualify as a small company:

a) A holding company or a subsidiary company.

b) A company registered under Section 8 of the Act.

c) A company or body corporate governed by any special act

(f) The auditor of following type of Private Companies are not required to comment on the matter prescribed under CARO 2016:

(1) A private company which is not holding or subsidiary company of a public company, and

(2) A private company having a paid up capital and reserve and surplus not more than Rs. 1 crore as on the balance sheet date, and

(3) A private company which does not have total borrowing exceeding Rs. 1 crore from any bank and financial institution at any point of time during the financial year, and

(4) A private company which does not have total revenue exceeding Rs. 10 crore during the financial year.

Note: Such revenue means revenue as disclosed in scheduled III to the Companies Act, 2013 and includes revenue from discontinuing operation.

Replies (6)

Vibha Trivedi

437 Points Joined October 2018

Sir,

You have not given any information about paid up share capital of the company.

Further if paid up share capital does not exceed 50 lac rupees it will qualify as a small company as you have mentioned its turnover is less than 10 lacs. So CARO will not be applicable.

If paid up share capital is more than 50 lac rupees, it will not fall within the criteria of small company.Then as mentioned reserve and surplus is more than 100 crore CARO will be applicable.

While calculating one crore limit in the relevant clause paid up capital and reserves and surplus are summed up and in case there is debit balance of p/l account it is subtracted.The final amount is taken whether it exceeds one crore or not

Computax

12 Points Joined July 2017

Hi Ma'am,

The paid up capital is 12 lakh, but share premium is more than 1 crore due to securities premium.

I fall in small company as, the turnover is less than 10 lakh and Paid up capital is 12 lakh.

But since as per clause (f) the paidup capital plus the reserves and surplus is more than 1 crore, whether CARO applicable as per clause (f) and not to follow clause (e) for non applicability in my case.