{"id":2032,"date":"2021-02-06T05:57:20","date_gmt":"2021-02-06T05:57:20","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=2032"},"modified":"2021-02-06T05:57:22","modified_gmt":"2021-02-06T05:57:22","slug":"mca-amends-the-definition-of-small-companies","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/mca-amends-the-definition-of-small-companies\/","title":{"rendered":"MCA Amends the Definition of Small Companies"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Ministry of\nCorporate Affairs (MCA) in accordance with the changes proposed by our Union\nFinance Minister, Ms. Nirmala Sitharaman has notified amendments in the provisions of the Companies Act 2013. These changes\nrelates to definition of a Small Company.<\/p>\n\n\n\n<p>Further, such an amendment has been bought by way of\nthe Companies (Specification of Definitions Details) Amendment Rules 2021. Also,\nit shall be significant to take into consideration that these amended\nregulations will come into effect from 01.04.2021.<\/p>\n\n\n\n<p>In this blog, we will discuss in detail the\namendments proposed by Union Budget 2021 in the provisions concerning small\ncompanies.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3aa723cc4eb\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3aa723cc4eb\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/mca-amends-the-definition-of-small-companies\/#Amendments_Made_in_the_Definition_of_Small_Companies\" title=\"Amendments Made in the Definition of Small Companies\">Amendments Made in the Definition of Small Companies<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/mca-amends-the-definition-of-small-companies\/#Old_Definition_of_Small_Company\" title=\"Old Definition of Small Company\">Old Definition of Small Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/mca-amends-the-definition-of-small-companies\/#New_Definition_of_Small_Company\" title=\"New Definition of Small Company\">New Definition of Small Company<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/mca-amends-the-definition-of-small-companies\/#Reasons_for_Amending_the_Definition_of_Small_Companies\" title=\"Reasons for Amending the Definition of Small Companies \">Reasons for Amending the Definition of Small Companies <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/mca-amends-the-definition-of-small-companies\/#Privileges_offered_to_Small_Companies\" title=\"Privileges offered to Small Companies\">Privileges offered to Small Companies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/mca-amends-the-definition-of-small-companies\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/mca-amends-the-definition-of-small-companies\/#Official_Copy_of_the_MCA_Notification\" title=\"Official Copy of the MCA Notification\">Official Copy of the MCA Notification<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Amendments_Made_in_the_Definition_of_Small_Companies\"><\/span>Amendments Made in the Definition of Small Companies<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The definition of the term Small Company is given under <strong><em>section 2 (85)<\/em><\/strong> of the Companies Act 2013. Further, to understand the amendments made in the definition of small companies, it necessary to compare the earlier definition with the new one. The same can be summarised as:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Old_Definition_of_Small_Company\"><\/span>Old Definition of Small Company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Based on the old definition, the term Small Company\nmeans a company other than a <strong><a href=\"https:\/\/swaritadvisors.com\/public-limited-company-registration\" class=\"text-primary\">public\nlimited company<\/a><\/strong>, which fulfils the conditions as follows:<\/p>\n\n\n\n<ul><li>Paid up Share\nCapital of this company must not be more than Rs 50 lakhs or such a higher\namount as may be specified which must not be more than Rs 5 crores;<\/li><li>Based on the\nProfit and Loss Account of the previous Financial Year, the Turnover of this\ncompany must not exceed Rs 2 crores or such a higher amount as may be specified\nwhich must not be more than Rs 20 crore;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"New_Definition_of_Small_Company\"><\/span>New Definition of Small Company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Based\non the new definition notified by MCA (Ministry of Corporate Affairs), the term\nSmall Company means a company other than a public limited company, which\nfulfils the conditions as follows:<\/p>\n\n\n\n<ul><li><strong><em>Paid up Share Capital<\/em><\/strong> of this company must <strong><em>not be more than Rs 2 crore<\/em><\/strong>;<\/li><li>Based on the Profit and Loss Account of the previous Financial Year, the <strong><em>Turnover<\/em><\/strong> of this company <strong><em>must not exceed Rs 20 crores<\/em><\/strong>;<\/li><\/ul>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/customs-tariff-amendment-rules-2021-notified-by-cbic\/\">Customs Tariff Amendment Rules 2021 by CBIC<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_for_Amending_the_Definition_of_Small_Companies\"><\/span>Reasons for Amending the Definition of Small Companies <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To <strong><em>provide benefit to more than 2 lakh small\ncompanies<\/em><\/strong> that are incorporated in India, MCA has notified a change in\nthe definition of small company, and has increased the limit of paid up share\ncapital and annual turnover from Rs 50 lakhs and Rs 2 crore to Rs 2 crore and\nRs 20 crores respectively.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Privileges_offered_to_Small_Companies\"><\/span>Privileges offered to Small Companies<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Based on the provisions of the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Companies_Act_2013\">Companies Act 2013<\/a>, the privileges offered to Small Companies are as follows:<\/p>\n\n\n\n<ul><li>It is mandatory\nfor every type of company registered under the provisions of the Companies Act\n2013 to hold <strong><em>4 Board Meetings<\/em><\/strong> in a year. However, in the case of a Small\nCompany, it needs to hold only <strong><em>2 Board Meetings<\/em><\/strong> in a calendar year,\ni.e., it must hold 1 Board Meeting in each Half Year. Further, it shall be\ntaken into due consideration that the gap between two meetings must not exceed\nthe period of 90 days;<\/li><li>In the case of a\nSmall Company, the Annual Returns can only be signed by a <strong><em>Practising Company Secretary<\/em><\/strong>.\nHowever, if there is no CS available, then, in that case, a <strong><em>Director\n<\/em><\/strong>can sign the same;<\/li><li>There is no need\nfor a Small Company to maintain <strong><em>Cash Flow Statements<\/em><\/strong> as the same is\npart of the Financial Statements;<\/li><li>It is compulsory\nfor every type of company registered under the provisions of the Companies Act\n2013 to change its Auditors by way of Rotation as specified under section 139\n(2) of the Companies Act 2013. However, it shall be significant to take into\nconsideration that there is no need for a small company to <strong><em>change its Auditors<\/em><\/strong> by\nway of Rotation and the same is exempt from this requirement;<\/li><li>There is no need\nfor a small company to report its <strong><em>Internal Financial Controls<\/em><\/strong> and the <strong><em>Operating\nEffectiveness<\/em><\/strong> in its Audit Report;<\/li><li>In the case of a\nSmall Company, there are <strong><em>Lesser Penalties<\/em><\/strong> prescribed in\ncomparison to any other company incorporated under the provisions of the\nCompanies Act 2013.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a nutshell, the amendment made by MCA was in\nconsonance to the announcement made by our Finance Minister in the <strong><a href=\"https:\/\/swaritadvisors.com\/blog\/union-budget-2021\/\" class=\"text-primary\">Union Budget 2021<\/a><\/strong>.\nFurther, the said amendment was made in the rules named Companies\n(Specification of Definitions Details) Rules 2014, which will become effective\nfrom 01.04.2021.<\/p>\n\n\n\n<p>The main aim behind the amendment made in the definition of small company was to provide the benefits and coverage of such a concept to 2 lakh companies operating in the economy as well. Therefore, we can state that the decision to amend the definition of small company is a pragmatic and growth oriented step of the government.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Official_Copy_of_the_MCA_Notification\"><\/span>Official Copy of the MCA Notification<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<a href=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/Small-Companies-Notification.pdf\" class=\"pdfemb-viewer\" style=\"\" data-width=\"max\" data-height=\"max\"  data-toolbar=\"bottom\" data-toolbar-fixed=\"off\">Small-Companies-Notification<br\/><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/companies-csr-policy-amendment-rules-2021\/\">Companies (CSR Policy) Amendment Rules 2021 notified by MCA<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Ministry of Corporate Affairs (MCA) in accordance with the changes proposed by our Union Finance Minister, Ms. Nirmala Sitharaman has notified amendments in the provisions of the Companies Act 2013. These changes relates to definition of a Small Company. Further, such an amendment has been bought by way of the Companies (Specification of Definitions [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":2033,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[50],"tags":[344],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2032"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=2032"}],"version-history":[{"count":12,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2032\/revisions"}],"predecessor-version":[{"id":2047,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2032\/revisions\/2047"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/2033"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=2032"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=2032"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=2032"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}