New Vs Old Definition Of Small Company By CS. Tanveer Singh Saluja

 

Author

CS. Tanveer Singh Saluja

cstanveersaluja@gmail.com

 

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As the annual filing season is coming along the way, it is pertinent to have a clear understanding about the applicability of definition of small company. For that matter, let’s have a look at some of the important points of consideration.

In the Union Budget 2021, Hon’ble FM Smt. Nirmala Sitharaman ji proposed to revise the definition of small company under the Companies Act, 2013 (the Act), with a view to facilitate ease of doing business and reducing compliance burden thereof.

Accordingly, the MCA notified a new set of Rules, Companies (Specification of Definitions Details) Amendment Rules, 2021 to amend the existing Companies (Specification of Definitions Details) Rules, 2014 (the Rules)vide Notification No. G.S.R. 92(E). dated, 1^st February, 2021.

With this amendment, a new clause (t) was inserted in Rule 2(1), to provide for amendment in the definition of small company.

The clause reads as follows:

“(t) 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.”

However, the definition under section 2(85) of the Act, is itself notamended by the Ministry.

The amendmentrules were set to come into force w.e.f. 1^st April, 2021.

Existing Definition:

Section 2(85): 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 thanten crore rupeesand

(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;

Amended Definition:

Keeping in view the insertion of clause (t) in Rule 2(1) of the Rules, it can be said that, for the purpose of bringing into effect the amended provisions, the definition under section 2(85) read along with the Rules shall be referred to, in the following manner:

small company means a company, other than a public company—

(i) paid-up share capital of which does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more thanten crore rupeesand

(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;

Criteria	Old	New
Paid-up share capital	50 lakhs	2 crores
Turnover	2 crores	20 crores

Form MGT-7A: It is also pertinent to note that w.e.f. F.Y. 2020-21, OPC and Small Companies shall file annual returnin formMGT-7A instead of form MGT-7 (Notification no. G.S.R. 159(E). dtd. 05^th March, 2021).

CONCLUSION

After considering the afore-mentioned points in general and date of applicability of the amended provisions in particular, it can be concluded that the amended definition is applicable from F.Y. 2021-22 onwards and it will have no impact on the filings which pertain to F.Y. ended 31^st March, 2021. That is to say, for the purpose of filings which pertain to the F.Y. 2020-21, the old definition of small company shall be applicable for all matters.

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Disclaimer: The author is based in Jabalpur and is a Practicing Company Secretary dealing in Corporate, Legal & Taxation services. The information contained in this write up, as provided by the author, is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Author recommends that professional advice is sought before taking any action on specific issues.

The author can also be reached at cstanveersaluja@gmail.com

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