MCA Breaking: Definition of "Small Company" Revised; New Limits Starting December 1:

MCA Breaking: Definition of "Small Company" Revised; New Limits Starting December 1 The Ministry of Corporate Affairs (MCA) has recently issued a notification dated December 1, 2025, revising the criteria for the definition of "Small Company" under the Companies Act. Starting from December 2025, the limits on paid-up capital and turnover for small companies have been increased. The change aims to reduce the compliance burden on small companies.

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As per the notification, "(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 ten crores and rupees one hundred crores respectively." What Has Changed? Previously, the paid-up capital for the small companies under the Companies Act was Rs 4 crore, and the turnover limit was Rs 40 Crore. Under the new rules effective from December 1, 2025, the limits for paid-up capital and turnover have been increased to Rs 10 crore and Rs 100 crore, respectively. This means that to fall under the definition of "small company", the companies must have a Paid-up capital of Rs 10 crore and a Turnover limit of Rs 100 crore. This will allow more companies to be classified as small companies. However, it must be noted that public companies, holding/subsidiary companies, Section 8 companies, and those covered under special acts are not included in this revision.

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Small Companies Vs Other Companies Small companies have several benefits compared to other types of companies. Here is the comparison:

• Board Meetings: Small companies only need to schedule 2 board meetings a year, with at least a 90-day gap in between. Other companies must hold 4 board meetings a year, with not more than 120 days' gap between them.
• Company Secretary Certification: The small companies are not required to file the CS certification in the annual return form MGT-7, while other companies must comply with this requirement.
• Rotation of Auditors: Small companies are not required to change auditors after a certain period, but other companies must rotate their auditors.
• CARO (Company Auditor's Report Order): CARO is the set of mandatory reporting requirements for auditors. Small companies do not need to follow CARO rules, but other companies must follow these rules.
• Dematerialisation of Shares: Small companies are not required to convert their shares into dematerialised form, while other companies must do it.

With the new limits for paid-up capital and turnover, more companies can benefit from these relaxed rules, making compliance simpler.