by CS Divesh Goyal
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Key – Relaxation to Small Companies


Delivering the Union Budget 2021-22, Finance Minister Nirmala Sitharaman, on Monday, proposed changes in definition of small companies under the Companies Act.


Old Definition: As per the Old definition

‘‘Small Company’’ means a company, other than a public company,—

(i) paid-up share capital of which does not exceed fifty lakh rupees, or such higher amount as may be prescribed which shall not be more than five crore rupees; and

(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:

New Definition: As per the new definition

Small companies means a company, other than a public company which have :-

  • Paid up share capital of not more than 2 crore rupees and
  • Turnover of which as per its last profit and loss account does not exceed 20 crore rupees.


‘‘Small Company’’ means a company, other than a public company,—

Que: Whether small company needs to file any from to convert into non-small Company?

There is no need to file any form or company any process to convert small company into non small Company. Once a company fall in limits given under definition of small Company it shall be consider as Small Company, if company cross the limits given in definition shall be consider as non-small company itself.

Important Note:

  1. Only a Private Company can be classified as a Small Company.
  2. If a Company doesn’t cross the above-mentioned limits, however, such a Company is a holding Company or a Subsidiary Company of any other Company then such a Company cannot be considered as a Small Company.
  • A Public Company cannot be a Small Company.
  1. A Section 8 Company cannot be a Small Company
  2. For a Small Company, both the conditions are needed to be fulfilled i.e the paid-up capital should not exceed Rs. 2 Crore or the turnover as per last statement of profit & loss should not exceed Rs. 20 Crore. If any of the given limits crossed at any point of time then such a Company shall be out of the  preview of a Small Company.

The status of a company as “Small Company” may change from year to year. Thus the benefits which are available during a particular year may stand withdrawn in the next year and become available again in the subsequent year.

Benefit to become Small Company:

  1. Lessor No. of Mandatory Board Meetings: 

Every Small Company shall hold a minimum number of Two meetings of its Board of Directors every year in such a manner that Minimum gap between the two meetings should not be Less than 90 (Ninety) days. {Section 173}.

In Case of Non-Small Company, it is required to hold four Board Meeting in a year.

  1. No Requirement of Cash Flow Statement: 

As per provisions of Companies Act, 2013, Small Companies are not required to prepare Cash Flow Statement.

  1. Certification of e-forms: 

As per provisions of Act, any e-form of Small Company are not required to get certify from Professional (CA/CS/ADV).

e-forms of non-small Company can be file with ROC only with Digital Signature of Directors.

  1. Abridge Directors report: 

There are a lot of difference b/w Directors Report of Small Company or Non-Small Company. By amendment in the Companies Act, 2013, MCA has introduced the abridged format of the Directors’ Report for a Small Company.

Abridge report means, director report of Small Company shall required to give less disclosures then a non-small Company.

  1. No IFC Reporting: 

A Small Company does not require to report in its Audit Report regarding Internal Financial controls and the operating effectiveness of the company.

  1. Lessor Penalties {446B): 

Notwithstanding anything contained in this Act, if penalty is payable for non-compliance of any of the provisions of this Act by a small company or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be.

  1. Rotation of Auditor {139(2)):

Provisions of Section 139(2) relating to rotation of auditor are not applicable on Small Company.

Means, in Small company it is not required to mandatory change the auditor by rotation.  An auditor firm or individual auditor can get appointment as auditor in small Company ever after 10 year or 5 years of appointment also.



Month April May June
Compliance ·       Obtaining of MBP-1

·       Obtaining of DIR-8

·       Filing of MSME-1 (30.04)

·       Holding of the First Meeting of the Board of Directors for the quarter


·        Filing of DPT-3 with the ROC (30.06)


Month July August September

Filing of FLA with RBI. If having foreign liability or assets





·       Holding of the Second Meeting of the Board of Directors.

·       Preparation/ Adoption of the Financial statement

·       Adoption Auditors’ Report

·       Preparation/ Adoption of the Directors’ Report

·       Obtaining of MBP-1, in case of any change.

·       Circulation of the Financial Statement and notice of AGM to the Shareholders, Directors, Auditor etc.

·       Holding of the Annual General Meeting

·       Filing of DIR-3 KYC (30.09)


Month October November December
Compliance ·        Filing of AOC-4 (29.10)

·        Filing of MSME-1 (30.10)

·        Filing of MGT-7 with ROC   (29.11) ·       Holding of Third Meeting of Board of Directors.

·       Obtaining of MBP-1, in case of any change.



Month January February March
Compliance     ·       Holding of the Fourth Meeting of the Board of Directors.

·       Obtaining of MBP-1, in case of any change.

(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice based in Delhi and can be contacted at csdiveshgoyal@gmail.com).

Disclaimer: The entire contents of this document have been prepared based on the relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.


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