Page 50 - Banking Finance November 2022

FEATURES

Ease of doing business: Centre

relaxes capital threshold for ‘small

companies’

he Corporate Government’s objective of promoting ease of doing business
T A f f a i r s for small companies by reducing their compliance burden.

M i n i s t r y
The increase of limit is also reflective of how the size of
(MCA) has
relaxed the paid-up companies has evolved over time. The revision will enable a
larger number of companies to avail the benefits of the
capital threshold for relaxation from compliance requirements under the Act.”
small companies,
Manendra Singh, Associate Partner, Economic Laws
facilitating further Ease
Practice, said: “In another move towards ease of doing
of Doing Business and
business, the government has expanded the scope of small
reduced compliance burden for such companies.
companies under Companies Act, 2013. As a result of which,
a larger set of companies would fall within such category.
Under the revised definition, the threshold for paidup capital
Notably, small companies are allowed various relaxations in
for small companies would be “not exceeding Rs. 4 crore”
terms of compliances (such as lesser penalties, exemptions
and turnover threshold being “not exceeding Rs. 40 crore”.
from cash flow statement), and that consequently reduces
Prior to the latest change, the threshold for paid up capital
the cost and expenses of such early stage companies.
was “not exceeding Rs. 2 crore” and turnover “not
exceeding Rs. 40 crore”.
Now, with the amendment, both paid-up capital and
turnover thresholds have been increased. Those companies
With this latest relaxation, the benefits small companies
whose paid-up capital does not exceed Rs. 4 crore and
could derive include dispensing with cash flow statement as
turnover does not exceed Rs. 40 crore, will qualify as small
part of the financial statement; filing an abridged annual
companies and hence avail the benefits available to them.
return; no mandatory rotation of auditor; no need to report
Earlier these limits were Rs. 2 crore and Rs. 20 crore, for
on the adequacy of the internal financial controls and its
paid-up capital and turnover, respectively.”
operating effectiveness in the auditor’s report; holding of
only two board meetings in a year; annual returns can be
Navin Kumar, Partner, Cyril Amarchand Mangaldas, said,
signed by the company secretary, or where there is no
““This will allow more companies (including start-ups) to
company secretary, by a director of the company, and lesser
avail benefits available to a small company under the
penalties.
Companies Act, 2013. This amendment will ease the
compliance burden of all such small / start-up companies for
Experts’ take holding minimum number of board meetings, preparation
Reacting to this, Archana Bhutani, Partner, Deloitte India, of financial statements, mergers between small companies,
said, “This is a significant move aligned with the lesser penalty for non-compliance, etc.” (Source: BL)

50 | 2022 | NOVEMBER | BANKING FINANCE