Center revises threshold for paid-up capital of small businesses


The Department of Corporate Affairs has again revised the threshold for paid-in capital for small businesses. The definition of small companies was revised under the Companies Act, 2013 by raising the paid-in capital limit from 50 lakh to 2 crore and turnover of 2 crore to 20 crores.

This threshold has now been revised again by raising the paid-in capital limit from “not more than Rs. 2 crores” to “not more than Rs. 4 crores” and turnover from “not more than Rs. 20 crores” to “not more than Rs. over Rs. 40 million”.

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This important step is part of the government’s proactive measures in the recent past to make the companies’ business and lives easier.

These include decriminalizing various provisions of the Companies Act, 2013 and the LLP Act, 2008, extending accelerated mergers to start-ups, encouraging the creation of One Person Companies (OPCs), etc.

According to the Department of Corporate Affairs, small businesses represent the entrepreneurial aspirations and innovation capabilities of thousands of citizens and contribute significantly to growth and jobs.

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“The government has always been committed to taking measures that create a more favorable business environment for companies that comply with the law, including reducing the compliance burden for such companies,” the ministry said in an official statement.

Benefits of a revised definition of small business

1) You do not need to prepare a cash flow statement as part of the financial statement

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2) Advantage of preparing and submitting an abbreviated annual return

3) Mandatory rotation of auditor not required

4) A small business auditor is not required to report in the auditor’s report on the adequacy of internal financial controls and their functioning

5) Hold only two board meetings in a year

6) Company annual return may be signed by the company secretary, or if there is no company secretary, by a director of the company

7) Fewer fines for small businesses

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