Small companies in India Archives

Exemptions in Company Act for Small Companies in India Introduction India is a fast-growing nation. The government modified the Company Act, helping small businesses and startups grow quickly. Special exemptions for small companies encourage more job creation and business development. This article shall help you know about the various exemptions which small companies enjoy. What is a Small Company? The idea of a small company is new in India and was introduced in the Companies Act 2013.A Small Company under the Companies Act 2013 is a private company with a paid-up capital of up to ₹4 crore and turnover up to ₹40 crore. Features of a Small Company (Companies Act 2013) A Small Company can only be a private company. It cannot be a public company, holding/subsidiary company, Section 8 (charitable) company, or one governed by a special law. Lower penalties apply for non-compliance. Status may change yearly based on paid-up capital and turnover. If limits are crossed, benefits are lost but can be regained later. Exemptions and benefits for Small Companies Under the Companies Act, 2013 1. Board Meetings (Section 173) Small companies meet compliance if they hold at least one Board meeting in each half of the year with a minimum 90-day gap between meetings. 2. Cash Flow Statement (Section 92) Unlike other companies, small companies don’t need to prepare a cash flow statement as part of their financial reports. 3. No Pre-Certification for Certain Forms Small companies don’t need certification from a CA, CS, or Cost Accountant for forms like INC-21, INC-22, PAS-3, DIR-12, ADT-1, AOC-4, and others. 4. Lower Incorporation Fees To support small businesses, the company registration fee is nearly half compared to larger companies. 5. Signing of Financial Statements If there is no Company Secretary, the Annual Return can be signed by a single director. 6. Simplified Disclosures in Annual Reports Instead of detailed director remuneration reports, only the total amount paid needs to be disclosed. We provide Register Pvt Ltd Company, LLP Registration Online, and Online MSME Registration services with expert guidance. Get your business registered easily today! 7. No Mandatory Auditor Rotation Small companies don’t need to change auditors every 5 or 10 years, unlike larger firms. 8. Exemptions in Auditor’s Report Auditors are not required to assess the adequacy and effectiveness of internal controls. 9. Easy Mergers (Section 233) Mergers between small companies, startups, or holding and subsidiary companies don’t need Tribunal approval if the Registrar and Official Liquidator raise no objections. 10. Reduced Penalties (Section 446B) If a small company violates the Companies Act, it faces only half the standard penalty compared to larger firms. Special Legal Provisions for Small Companies Small private limited companies can merge with another small company without a judges's approval. Instead, they only need approval from the Central Government (Regional Director) as per the Companies Act, 2013. However, a small company cannot qualify for exemptions if: It is a holding or subsidiary company It is a Section 8 (charitable) company It is Governed by a special law Conclusion The Companies Act 2013 introduced small companies to support small businesses in India. With fewer compliances and simpler governance, they can focus on growth instead of legal formalities. Though not given a special name, their status under the Act offers many benefits for emerging businesses. Suggested Read : Benefits of Udyam Registration OPC Turnover Limit for Small Businesses Essential nil return filings for small businesses ROC Registration for Small Business Types of business licenses and permits FAQ A company remains a "small company" if it meets the criteria for two consecutive financial years. If it exceeds the limits in any year, it loses small company status. Lower compliance requirements Reduced audit burden Lower fees and penalties Easier regulatory approvals No, as per the Companies Act, 2013, Section 8 companies (non-profits) are not considered small companies.Audit fees vary based on turnover and location, but they are generally lower compared to large companies. Paid-up capital ≤ ₹4 crore Turnover ≤ ₹40 crore (as per Companies Act, 2013, after 2023 amendment)

Small companies in India

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