New Definition of Small Company

New Definition of Small Company

The Ministry of Corporate Affairs has notified an amendment in the Companies (Specification of Definitions Details) Rules, 2014 that came into force on 1st April 2021.

The MCA (Ministry of Corporate Affairs) has effected this amendment in accordance with the proposal of the Honourable Finance Minister to revise the definition of Small companies in India by increasing the paid-up capital limit from INR 50 Lacs to INR 2 Crores in the Union Budget 2021 while the turnover threshold by enhancing from INR 2 crores to 20 crores.

As per the current scenario, with the change in definition of small companies, there has been a development that helped more companies with the purpose of giving the benefit of the liberalized regime.

New Definition of Small Company

As per the new definition and threshold limits, companies with a paid-up capital of INR 2 crore or less, and turnover of INR 20 crore or less come are defined as small companies. The earlier threshold was INR 50 lacs or less in paid-up capital and INR 2 crore or less in turnover.

Criteria Old Limits New Limits
Paid-up share capital 50 lakhs 2 crores
Turnover 2 crores 20 crores

In consideration to the above, the following would NOT be SMALL COMPANY w.e.f. 1st April 2021:

  • Listed Company
  • Public Unlisted company
  • Section 8 Company under Companies Act, 2013
  • Holding Company
  • Subsidiary Company
  • Company or Body Corporate governed by any special act
  • Private Company whose Paid-up capital exceeds Rs 2 crores
  • Private Company whose Turnover for the immediately preceding year exceeds Rs 20 crores

Hence, from 1st April 2021, a private company (which is not a holding or subsidiary or section 8 company or a company governed by any special act) would be a Small Company if it would be having its:

  • Paid-up capital not exceeding Rs 2 Crores;

AND

  • Turnover for the immediately preceding year not exceeding Rs 20 crores.

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