All about a small company under Companies Act, 2013


By CA Vijaykumar Puri ~ Partner, VPRP & Co LLP, Chartered Accountants


people sitting on chair in front of table while holding pens during daytime
people sitting on chair in front of table while holding pens during daytime

It is common knowledge now that the compliances under Companies Act, 2013 are tiresome. They are only getting stricter.

In this light, it does not make sense that the compliances applicable to Reliance Industries Ltd are same for compliances of Chotu and Motu Pvt. Ltd.

The Government had introduced the concept of "small company" under section 2(85) of the Companies Act, 2013.

W.e.f 15 September 2022, the criteria has been amended to include a company which has

- Paid up share capital of upto Rs 4 crores;

- Turnover of Rs 40 crores

Benefits / exemptions for small company

1. Board Meetings:

Small companies doesn’t have a wide range of business so it’s not required for small companies to hold 4 board meetings in year, small companies may hold only 2 board meetings in a calendar year, i.e. one Board Meeting in each half of the calendar year with a minimum gap of 90 days between the two meetings.

2. Rotation of company auditors:

It is not necessary for small companies to follow the condition laid in Section 139(2) of the Companies Act 2013, which mandates the rotation of auditors every 5 years (individual auditors) and every 10 years (firm of auditors).

3. Exemptions for Board’s Report:

Matters to be included in Board’s Report mentioned in Rule 8 of Companies (Accounts) Rules, 2014 do not apply for small company.

4. Annual Return:

Annual Return of a Small Company can be signed by the company secretary alone, or where there is no company secretary, by a single director of the company.

5. Remuneration details in Annual Return :

As per section 92 of Companies Act, 2013 private companies are require to give a details of remuneration of directors and key managerial personnel , but in small companies only “aggregate amount of remuneration drawn by directors” is required in annual return.

6. Cash Flow Statement:

A small company needs not to include Cash Flow Statement as part of its financial statement.

7. Exemptions for Audit Report:

Small companies are not required to give report on internal financial controls with reference to financial statements and the operating effectiveness of such controls in audit report.

8. Lesser penalties for Small Companies under Section 446B of the Companies Act, 2013:

If a small company fails to comply with the provisions of section 92(5), section 117(2) or section 137(3), such company and officer in default of such company shall be liable to a penalty of upto 50% of the penalty specified in such sections.

As we can see, a small company has various concessions granted to it. Many SMEs will get covered in the new definition of small company.

It is important for companies to assess and avail the benefit of lesser compliances of a small company.

Thank you for reading.

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