Tag Archives: Small Company

Small and Medium Sized Company


My law teacher told me in law class, human is a social animal. Yesterday I found, modern human is social media animal. Last two days, we received a flood of social media messages claiming change in definition of small and medium enterprises. Only a fine reader can point out misunderstanding caused by this statement.

We need to understand interplay of the Companies Act, 2013, Micro, Small and Medium Enterprises Development Act, 2006 and newly notified the Companies (Accounting Standards) Rules, 2021.

No Government can change even a single alphabet in an Act of Parliament by way of notification of a Rule unless power is given specifically. Definition of the small companies is given in the definition clause Section 2(85) of the Companies Act, 2013:

 “Small company” means a company, other than a public company, —

(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and

(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:

Provided that nothing in this clause shall apply to—

(A) a holding company or a subsidiary company;

(B) a company registered under Section 8; or

(C) a company or body corporate governed by any special Act.

The definition under this definition clause is applicable wherever word “small company” in the Companies Act, 2013. This definition may be amended by the Companies (Specification of definitions Details) Rules, 2014 or any amendment therein. No amendment in this general definition may be made by the Companies (Accounting Standards) Rules, 2021 or its earlier version.

Rule 2(1)(t) of the Companies (Specification of definitions Details) Rules, 2014 with effect from 1 April 2021 amends the definition of Small Company saying that For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees two crores and rupees twenty crores respectively.

The final definition of small company under Section 2(85) read with Rule 2(1)(t) of the Companies (Specification of definitions Details) Rules, 2014 with effect from 1 April 2021 is hereunder:

 “Small company” means a company, other than a public company, —
(i) paid-up share capital of which does not exceed two crores rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and
(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed twenty crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under Section 8; or
(C) a company or body corporate governed by any special Act.

Any change in the definition of small company, more than ten crore and one hundred crore respectively for paid up capital and turnover shall require an amendment to the Companies Act, 2013.

This definition in the Companies Act, 2013 is applicable for all purposes of the Companies except (a) the accounting practices therein and (b) benefits provided by the Government to MSMEs.

The Companies (Accounting Standards) 2021 deals with the presentation of company accounts.

The term enterprises mentioned in Accounting Standards and the Companies (Accounting Standards) Rules is specific and restricted only to companies not any other form of enterprises. It is not applicable to all industrial undertaking, business concerns or other establishments except companies.

The Companies (Accounting Standards) 2021 defines Enterprises in Rule 2(d):

“Enterprise” means a ‘company’ as defined in clause (20) of section 2 of the Act.

Thereafter the Companies (Accounting Standards) Rules 2021 defines “Small and Medium Sized Company (SMC)” not small and medium enterprises (SME). Definition of small enterprises and medium enterprises is given in the Micro, small and Medium Enterprises Development Act, 2006 as amended time to time. We have already discussed this definition in details here earlier.

The definition of “Small and Medium Sized Company (SMC)” in Rule 2(e) of the Companies (Accounting Standards) Rules 2021 is hereunder:

“Small and Medium Sized Company” (SMC) means, a company-

  • whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India;
  • which is not a bank, financial institution or an insurance company;
  • whose turnover (excluding other income) does not exceed two hundred and fifty crore rupees in the immediately preceding accounting year;
  • which does not have borrowings (including public deposits) in excess of fifty crore rupees at any time during the immediately preceding accounting year; and
  • which is not a holding or subsidiary company of a company which is not a small and medium-sized company.

Explanation. – For the purposes of this clause, a company shall qualify as a Small and Medium Sized Company, if the conditions mentioned therein are satisfied as at the end of the relevant accounting period.

For different purposes a company may either be:

  • Small Company or not;
  • Small and medium sized company or not;
  • Micro enterprises or small enterprises or medium Enterprises or none of these three.

It all depends upon relevant definition for the time being in force. One company may fall in one or more or none of these categories. Simple check points are:

Small CompanySmall and Medium Sized CompanyMicro Small and Medium Enterprise
Paid up CapitalTurnoverInvestment in Plant and Machinery
TurnoverBorrowing —

The companies (Accounting Standards) Rules 2021 has limited applicability with respect to applicability of accounting standards in relation to books of account of companies. These rules come into effect from the date of publication which is 25 June 2021 not on its issue date which is 23 June 2021. Further Rule 3(2) made it clear that accounting standards notified under these rules comes into effect retrospectively from 1 April 2021.

Board report for OPC and Small Companies


This was a long-standing demand to have less compliance for one person and small companies. Rule 8A introduced with effect from 31st July 2018 by the Companies (Accounts) Amendment Rules 2018. Let us discuss.

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EXEMPTION TO PRIVATE COMPANIES


On 5th June 2015, Ministry of Corporate Affairs posted here a draft notification to be published in Official Gazette announcing some exemption to Private Companies.

As there is no effective date is announced in the Notification, this notification shall come into effect on the date of its publication in the Official Gazette.

[UPDATE 20th June 2015: MCA uploaded copy of Official Gazette dated 5th June 2015, in which this Notification is published. Meaning that; These exemption came into force from that date]

The Notification is issued in exercise of power conferred by Clauses (a) and (b) of Sub – section (1) of 462 read with sub –section (2) of said section of the Companies Act, 2013. A copy of this notification has been laid in draft before both Houses of Parliament as required by sub-section (2) of section 462 of the Companies Act, 2013.

Paragraph 2 of the Notification cast a condition on the Private Companies:

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The Company under the Companies Act 2013


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

This is my first post after passing of the Companies Bill, 2012 by Rajya Sabha on 8th August 2013. Lok Sabha have already passed this Bill, earlier on 18th December 2012. The Bill is just one signature away from being an Act or two-three step away from come to be in forced by Notification.

Here, I try to study briefly some definitions related to companies under present Bill [Now the Companies Act, 2013]. Readers may please add their inputs in comment section of this post.

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