The Companies Act 2013 had introduced the concept of Small Company. It is not specifically registered with the specific name but is simply a Private Company with less amount of investment and less turnover. In a Developing Country like India, such a company plays a significant role.
Small Company under Companies Act 2013
According to Companies Act 2013, Small company means the company which satisfies the following conditions:-
- It has paid up share capital of not more than 50 lakhs or such higher amount as may be prescribed which shall not be more than 10 crores
- It has annual turnover of not more than 2 crores or such higher amount as may be prescribed which shall not be more than 100 crores.
To become a Small Company, a Private Company requires to fulfill both of the conditions prescribed above.
Exceptions in case of Small Companies
A Company is not a Small Company if:-
- It is a Public Company.
- It is a Holding of another company.
- The company is a subsidiary of another company.
- The company is a Section 8 Company.
- It is a company governed by any Special Act.
Features of Small Company
- Small company is a Private Company.
- It has limited Area of operation.
- It has a fewer number of employees.
- Companies Act 2013 provides certain benefits to Small Company.
- It holds a limited amount of Investment.
- It has Separate legal entity from its owners.
- The status of a Small Company may change from year to year as capital and turnover changes every year.
Privileges
Companies Act 2013 provides certain benefits to the Small companies which includes:-
- Every company is required to hold 4 Board Meetings in a year. While a Small Company needs to hold only 2 Board meetings in a calendar year i.e. one board meeting in each half of the calendar year. However the gap between the two board meetings should not be less than 90 days.
- In case of Small Company, the Annual Return can be signed by Company Secretary alone or if there is no CS, by a single Director only.
- A Small company does not require to maintain a Cash flow statement as a part of its Financial Statements.
- Every company needs to change its auditor by rotation according to Section 139(2) of Companies Act 2013. However Small company need not comply this section and hence is exempt from the requirement of this section.
- A Small Company does not require to report in its Audit Report regarding Internal Financial controls and the operating effectiveness of the company.
- In case of Small Company, Companies Act prescribes lesser penalties as compared to every other company.
FAQs
A small company is a private company whose capital does not exceed 50 lakhs or such higher amount as prescribed which shall not be more than 10 crores and turnover does not exceed 2 crores or such higher amount as may be prescribed which shall not be more than 100 crores while a Private company includes a Small Company.
If the capital of a Small Company or turnover exceeds the threshold limit, it is no more considered as a Small Company and it can no more enjoy the privileges granted to a Small Company under the Act.
Hey @Anamika_Sharma
According to Companies Act 2013, Small company means the company which satisfies the following conditions:-
You can read more about Small Companies here:
Hope this helps!