MCA: Increases threshold limit for paid-up capital and turnover of small companies

The Ministry of corporate Affairs (MCA) via official gazette, dated 15th September, 2022, has redefined small companies to increase the threshold for paid up capital and turnover. The Ministry of Corporate Affairs (MCA) said that these measures were taken to facilitate the ease of doing business.
As per the new definition and threshold limits, companies with a “paid-up capital” of “INR 4 crore or less”, and “turnover” of “INR 40 crore or less” come are defined as small companies. The earlier threshold was INR 2 crore or less in paid-up capital and INR 20 crore or less in turnover.

The new definition will be applicable for FY 2022-23
Following are the some of the benefits of reduction in compliance burden as a result of the revised definition of small companies:

• Holding of only two board meetings in a year.
• No need to prepare a cash flow statement as part of the financial statement.
• Advantage of preparing & filing an Abridged Annual return.
• Annual return of the company can be signed by company secretary, or where there is no company secretary, by the director of the company.
• Mandatory rotation of auditor is not required.
• 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.

Varsha Laur, Audit Associate, SW India