About
The concept of Small Company was first introduced in the Companies Act, 2013. This is a new step towards the deregulation of entities through providing some exemptions, privileges, and liberation with lesser compliances burden on the entities which are smaller in size and operations. A Small company means a company, other than a public company, with paid-up share capital which does not exceed Rs. 50 lakhs or such higher amount which shall not be more than Rs.5 crore, and turnover as per its last profit and loss account does not exceed Rs.2 crore or such higher amount which shall not be more than Rs.20 crore.
What are the advantages of a Small Company?
A private limited company classified as a small company enjoys several benefits under the Companies Act, 2013, and lesser compliance formalities. Some of the advantages enjoyed are:
Filing of annual return
The annual return of a private limited company classified as a small company can be signed by a Company Secretary (CS) or by a Director of that private limited company. The annual return of a private limited company other than a small company must be signed by a Director and a Company Secretary.
Board Meeting
It is sufficient for a small company to conduct only two Board Meetings in a calendar year, one in every half calendar year with a gap of not less than 90 days between these two meetings.
Private limited companies not classified as a small company are required to conduct four Board Meetings in a financial year, i.e. at least one meeting in every quarter and the gap between the two consecutive meetings should not be more than 120 days.
Cash Flow Statement
A private limited company classified as a small company need not prepare a cash flow statement as a part of the financial statements. Private limited companies not classified as a small company must prepare a cash flow statement as a part of the financial statements.
Rotation of Auditors
A small company is not required to rotate its Statutory Auditors. The private limited company not classified as a small company must rotate their Auditors every 5 or 10 years if these companies fall within the prescribed category such as their paid-up share capital is more than Rs. 50 Crores more or these are having public borrowings from financial institutions, banks, or public deposits of Rs. 50 Crores or more.
A holding company or subsidiary company cannot avail of the benefits of a small company even if it may fulfill the capital or turnover requirement of a small company.
The privileges available to a small company are the same as that available to a one-person company, but not all privileges available to a one-person company are available to a small company.
So also, a company registered under Section 8 of the Companies Act, 2013 is also specifically excluded from the definition of a small company. Hence, any company registered under Section 8 of the Companies Act, 2013 would not be a small company though it may be a private company.
