Article

Amendment in the definition of a small company

defination of small company

A small company is defined as a privately owned corporation, partnership, or sole proprietorship that has fewer employees and less annual revenue than a corporation or regular-sized business. Small companies increase employment opportunities and are considered the backbone of the economy. The characteristics of a small company are: 

What is a small company?

1) Lower Revenue and Profitability

2) Small team of employees 

3) Limited Area 

In accordance with the changes proposed by our Union Finance Minister Nirmala Sitharaman, The Ministry of Corporate Affairs has notified amendments in the Companies act 2013.

To provide benefit to more than 2 lakh small companies that are incorporated in India, MCA has notified a change in the definition of a small company and has increased the limit of paid share capital and annual turnover from Rs 50 lakhs and Rs 2 crore to Rs 2 crore and Rs 20 crores respectively.

Below is the new amended definition of a small company compared to the old definition for better understanding.

Old definition- Section 2(85)New Definition- Section 2(85)

“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 ten crore rupees; and(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crores rupeesProvided that nothing in this clause shall apply to-(A) a holding company or a subsidiary company;(B) a company registered under section 8; or(C) a company or body corporate governed by any special Act;

“Small company” means a company, other than a public company, —(i) paid-up share capital of which does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed twenty crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crores rupeesProvided that nothing in this clause shall apply to-(A) a holding company or a subsidiary company;(B) a company registered under section 8; or(C) a company or body corporate governed by any special Act;

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