The Ministry of Corporate Affairs (“MCA”) has significantly expanded the monetary thresholds for classification of Small Companies under the Companies Act, 2013 (“Companies Act”), through Notification No. G.S.R. 880(E) dated December 01, 2025. The revised limits, effective immediately, greatly widen the number of corporate entities that can avail reduced compliance requirements and cost benefits. Under the amended definition, a company will now qualify as a “Small Company” if it has:
(i) Paid-up share capital of ₹10 Crores or less, and
(ii) Turnover of ₹100 Crores or less, as per the profit and loss statement for the immediately preceding financial year.
However, the following entities shall not be considered as Small Companies, even if they meet the revised financial limits:
(i) Holding or subsidiary companies
(ii) Companies registered under Section 8 (not-for-profit entities)
(iii) Companies or bodies corporate governed by any Special Act
WHY THE CHANGE MATTERS
The objective behind expanding the Small Company definition is to encourage ease of doing business, reduce compliance expenditure for smaller entities, and enable better utilisation of resources towards business growth rather than regulatory overheads.
KEY EXEMPTIONS AND COMPLIANCE BENEFITS FOR SMALL COMPANIES
Small Companies enjoy multiple relaxations under the Companies Act and Rules, including:
1. Simplified Annual Return Filing:
• The Annual Return of a Small Company may be signed by a single director where there is no Company Secretary (unlike other companies where certification by a practicing Company Secretary is mandatory).[1]
• Annual Return can be filed in Form MGT-7A, a shorter and simplified format (as compared to Form MGT-7).
2. Reduced Number of Board Meetings:
• A Small Company is required to conduct only 2 board meetings per year, one in each half of the calendar year, with a minimum gap of 90 days between meetings (instead of four meetings for other companies).[2]
3. Auditor Rotation Exemption:
• Mandatory auditor rotation after every 5 years is not required for Small Companies.
4. Reduced RoC Fees & Lower Penalties:
• Various RoC filing fees are significantly lower for Small Companies as compared to other companies.
• The penalties imposed on Small Companies shall be not more than one-half of the applicable penalty for other companies, subject to a maximum of ₹2,00,000 for the company and ₹1,00,000 for an officer in default.[3]
5. Fast-Track Mergers:
• Small Companies can undertake mergers or amalgamations through a fast-track process (without the involvement of National Company Law Tribunal), provided there are no objections from the Registrar of Companies, Official Liquidator or the Central Government.[4]
CONCLUSION
The revised eligibility thresholds enable several thousand additional private limited companies across India—including early-stage businesses, growing MSMEs, and promoter-driven companies—to significantly reduce their compliance burden and operational costs. This move is expected to promote entrepreneurship, strengthen MSME growth and enhance ease of doing business.
For any queries or discussions, you can reach out to our contributors:
Akash Kumar (akash@asqlegal.com)
Asutosh Mahapatra (asutosh@asqlegal.com)
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References:
- Section 92, Companies Act.
- Section 173(5), Companies Act.
- Section 446B, Companies Act.
- Section 233, Companies Act.
