Exemptions for small companies, Exemptions from Penalties, Companies Act, 2013, Annual Reports, Ebizfiling.

What are the exemptions for small companies under the Companies Act, 2013?

Introduction

Small businesses in India have been granted exemptions under the Companies Act, 2013, which has been enacted to ensure that companies conduct business transparently, and with accountability. In this article, we discuss the exemptions for small companies under the act like financial records, annual reports, number of board meetings, exemption from penalties, etc.

What is a small company?

As per the Companies Act, 2013, a Small company means:

A company, other than a public company:

  • paid-up share capital of which does not exceed two crore rupees;
  • turnover of which as per its last profit and loss account does not exceed 20 crore rupees;

Provided nothing in this clause shall apply to:

Exemption for small companies under the Companies Act, 2013

The Companies Act, 2013 provides certain exemptions for small companies, which are as follows:

 

1. Financial Record Requirements: Small companies are not required to include their cash flow statement in their financial records.

 

2. Annual reports: The annual reports of small companies must contain information regarding the aggregate amount of remuneration worn by directors. The annual records can be signed by the company secretary alone or by a single director in case of the absence of the secretary. Other companies must have their records signed by both the secretary and the director.

 

3. Restrictions on the Number of Board Meetings: A small company is only required to conduct two board meetings per year, one in each half of the calendar year. These meetings must be held with a gap of 90 days between them. In contrast, other companies conduct four meetings per year.

 

4. Rotation of Company Auditors: Small companies can follow the condition laid out in Section 139(2) of the Companies Act 2013, which provides for the rotation of auditors every five years in the case of individual auditors and every ten years in the case of an auditor that is a company.

 

5. Exceptions in Auditor’s Reports: Auditors do not have to mention the adequacy of internal controls and their operational effectiveness in their reports for small companies.

 

6. Exemption from Penalties: If a company fails to comply with the provisions of Section 92(5), Section 117(2), and Section 137(3) of the Companies Act, 2013, then such company shall be punished with imprisonment or fine or both, depending on the integrity of the offense. However, small companies are exempted from punishment and often impose lesser penalties under Section 446B of the Companies Act, 2013.

Conclusion

The exemptions for small companies are not listed under a separate section but rather included in relevant regulatory provisions. However, there are many cross-references of other sections are provided, making it difficult to understand the exemptions for small companies under the Companies Act, 2013. Therefore, it is recommended to seek advice from experts who will not only provide you with knowledge on the provisions but also guide you on the procedural formalities necessary to take advantage of these exemptions, as well as the paperwork required to benefit from them.

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Author: siddhi-jain

Siddhi Jain (B.A.LLB) is a young and passionate Content Writer at Ebizfiling Private Limited. She enjoys reading and writing about legal topics and simplifying complex legal concepts for a wider audience. Her goal is to continue growing as a content writer and to become a subject matter expert in legal and business topics.

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