MCA revises threshold for paid up capital of small companies



Quick Summary
The Ministry of Corporate Affairs (MCA) has revised the definition of 'small companies' by increasing the paid-up capital threshold from £2 crore to £4 crore and the turnover threshold from £20 crore to £40 crore. This move aims to further facilitate ease of doing business and reduce the compliance burden for these companies, which are vital for economic growth and employment. The revision brings several benefits, including simplified financial statement preparation and fewer mandatory board meetings.

MCA revises threshold for paid up capital of "small companies"

Latest revision to facilitate Ease of Doing Business further and reduce compliance burden on "small companies"

The Ministry of Corporate Affairs (MCA) has taken several measures in the recent past towards ease of doing business and ease of living for the corporates.  These included 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. Earlier, definition of "small companies" under the Companies Act, 2013 was 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 definition has, now, been further revised by increasing such thresholds for paid up Capital from "not exceeding Rs. 2 crore" to "not exceeding Rs. 4 crore" and turnover from "not exceeding Rs. 20 crore" to "not exceeding Rs. 40 crore".

Small companies represent the entrepreneurial aspirations and innovation capabilities of lakhs of citizens and contribute to growth and employment in a significant manner. The Government has always been committed to taking measures which create a more conducive business environment for law-abiding companies, including reduction of compliance burden on such companies.

Small Company Paid-Up Capital Threshold Raised by MCA

Some of the benefits of reduction in compliance burden as a result of the revised definition for small companies are as under:

  • No need to prepare cash flow statement as part of financial statement.
  • Advantage of preparing and filing an Abridged Annual Return.
  • Mandatory rotation of auditor 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 here

FAQ :

The new threshold for paid-up capital for small companies has been revised to not exceeding £4 crore.

The turnover threshold for small companies has been increased to not exceeding £40 crore.

The revision is intended to further facilitate ease of doing business and reduce the compliance burden on small companies.

Benefits include not needing to prepare a cash flow statement, filing an abridged annual return, no mandatory auditor rotation, and fewer board meetings.

No, the auditor of a small company is not required to report on the adequacy and effectiveness of internal financial controls.




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Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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