Small Companies – Big Benefits

1. Introduction: shall not be more than ten crore rupees; and 2.turnover of which as per profit and loss Small Companies are the backbone of the Indian economy. In a country like India which is account for the immediately preceding in its developing stage, Small Companies play a financial year does not exceed Forty very vital role in the creation of more Crores or such higher amount as may employment opportunities and in the growth be prescribed which shall not be more of the economy. The concept was introduced than one hundred crore rupees. to protect small Companies with fewer Provided that nothing in this clause shall apply revenues, from stringent compliances to— applicable to other big Companies having ample resources and revenue. 1.a holding Company or a subsidiary Company. 2.a Company registered under section 8; or 3.a Company or body corporate governed by any special Act. Benefits: The main reason for bringing into the picture The Central Government has vided Notification the concept of “Small Companies”,was to G.S.R. 700(E) dated 15th September 2022 provide them with certain relaxations with amended the Companies (Specification of regard to the stringent compliances applicable Definitions Details) Rules, 2014 amending the to other big companies. Some of those benefits definition of “SMALL COMPANIES”in order to are as listed below: Improve business facilitation and reduce the • compliance burden for “small businesses”. Board Meeting Under section 173 of the Companies Act 2013 Definition: every Company is required to conduct at least 4 Board meetings in every calendar year. Small As per section 2(85) of the Companies Act 2013 companies are provided relaxation in this and Rule 2(1)(t) of the Companies regard, as they need to have one Board (Specification of Definition Details) Rules 2014 Meeting in each half of the calendar year with a minimum gap of 90 days. In simple terms, “Small Companies” means a Company,Other small companies only need to have 2 Board than a Public Company, having, meetings during a year. 1.paid-up share capital of which does • Fees for Incorporation not exceed 4 crores, or such higher The fees to be paid on the incorporation of a amount as may be prescribed which Small Company is much less as compared to

2. the fees to be paid on the incorporation of a Small Companies need not mention in the large or medium size Companies. Board’s report matters as stated in Rule 8 of the Companies (Accounts) Rules, 2014. • Annual Return Instead, they shall include the information The Annual returns of the Company need not outlined in Rule 8A Companies (Accounts) be certified by a Professional if the company is Rules, 2014. a Small Company. The same can be signed by a Company secretary if there is any or a director of the Company. • Form MGT-7A Small Companies need to file their Annual Return in form MGT-7A instead of form MGT-7 which is applicable to other large and medium companies. Form MGT-7A can be said to be a simpler version of Form MGT-7. • Adequacy of Internal Financial • Professional Certification Control As per Rule 8 (12) of Companies (The Auditors of Small Companies need not report Registration offices and fees) Rules, 2014, on the adequacy of the Internal Financial there are various E-forms to be filed with ROC Control in Auditor’s report. that needs professional certification by a Practicing Company Secretary, Practicing • Fast Track Merger Chartered Accountant, or Practicing Cost Mergers between two small Companies, two accountant. The same does not apply in the startup Companies, one startup, and one case of a small company. small company, and a holding company and its wholly-owned subsidiary company can be • No requirement of Cash Flow done through Fast track mode. This type of Statement merger does not require the approval of NCLT. Unlike other companies, a Small Company is free from the requirement of having a Cash • Lesser Fee and Penalties: flow statement as a part of its financial In comparison fee charged for filing forms to statement. ROC, it also offers lower fee to small Companies. • Rotation of Auditor The provision of section 139 (2) of the Conclusion: Companies Act 2013, which talks about the mandatory rotation of auditors is not It is much needed and necessary step to applicable to a Small Company. provide relief to small Companies from the complex provisions that were designed and • Board Report Matter drafted from the point of view of large or

3. medium-sized Companies. Moreover, by Once you cross these limits a small Company increasing the limits for being a Small will lose its status as a small Company. Again, Company, the government has made way for in the subsequent year if you regain those many companies to worry less and work more parameters, again you will be classified as a towards the accomplishment of their goal, Small Company. Hence, it’s a continuous which in the end would benefit the Indian exercise of checking your Company’s Economy. thresholds with those mentioned in the Act/rules. The eligible status of the Small Companies and the advantages being provided to them are SimplyCorp is a solution that offers frequently unknown to the promoters and comprehensive and end-end management of directors. So, for them to claim the Corporate Governance & Secretarial advantageous position, they must be aware of Compliances covering all stages of entity life such provisions. cycle. If want to know more on the compliance requirements and outsource the same to us, The thing which needs to keep in mind is that please write to our Product Head – Vaishali a small Company’s status can change each year Vohra at the mail depending on its paid-up capital and turnover ID vaishali@simplybiz.in or SimplyCorp@si limits. mplyBiz.in. Contact Us! Address: Address:1st Floor, Golden Heights, Plot # 9, Opp: Raheja, Mindspace, Hyderabad, Telangana 500081 Contact No: Contact No:+91 81210 11573 Email ID: Email ID:hi@simplybiz.in