From Change In Threshold Limit On Paid-Up Capital To Auditor, Check New Rules Announced For Small Companies

The threshold for small companies' paid-up capital increased to "not exceeding Rs 4 crore" from "not exceeding Rs 2 crore" while turnover threshold has been revised to "not exceeding Rs 40 crore"

Small companies will not be required to prepare cash flow statements as part of financial statement and can file an abridged annual return, the ministry said.

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With a move to reduce the compliance burden on small companies, the ministry of corporate affairs has again revised the threshold limit for paid-up capital of small-scale companies. "The government has always been committed to taking measures which create a more conducive business environment for law-abiding companies, including reduction of compliance burden on such companies," said the ministry of corporate affairs.

The government has taken various measures recently, including decriminalisation of various provisions under the companies law, to further improve the ease of doing business in the country, the ministry noted, according to the PTI.

Know new rules impacting small companies

With the amendments to certain rules, the threshold for small companies' paid-up capital has been increased to "not exceeding Rs 4 crore" from "not exceeding Rs 2 crore". Likewise, the turnover threshold has been revised to "not exceeding Rs 40 crore" from "not exceeding Rs 20 crore", the ministry said in a release on Friday.

The latest changes will allow more entities to come under the category of small companies. Small companies will not be required to prepare cash flow statements as part of financial statement and can file an abridged annual return, according to the ministry of corporate affairs.

Apart from this, small companies won’t require to have the mandatory rotation of auditors.

An auditor of a small company is not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor's report, and such companies need to hold only two board meetings in a year, the release said.

There are lesser penalties for small companies and annual returns of such entities can be signed by the company secretary, or where there is no company secretary, by a director of the company.