Small company is a concept introduced in the Companies Act 2013 and the definition of Small Company is provided under section 2 (85), which reads as below:
“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 five crore rupees; or
(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty 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;
PROPOSED DEFINITION
This definition of a small company is very vague, and also does not include un-listed public companies, although their turnover and capital are less than most of the private companies. In line with Ease of Doing Business, the definition of “small company” may be re-defined to read as below:
“small company” means any company not having listed any of its securities and as also a company which has a paid up capital, turnover of such sum as may be prescribed from time to time by way of a notification and where such companies have NOT raised funds by –
a. Allotment of shares to persons other than Members, Director and their relatives; and
b. Accepting deposits from persons other than Members, Director and their relatives; and
c. Borrowing from any financial institutions and banks for working capital and term loan not exceeding twice the share capital;
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; Indicative Present limits:
a. Paid-up share capital of less than Rs. 5 crores
b. Turnover of less than Rs. 50 crores
LIST OF SECTIONS UNDER COMPANIES ACT, 2013 WHICH NEED NOT APPLY TO SMALL COMPANIES
LIST OF SECTIONS UNDER COMPANIES ACT, 2013 WHICH MAY BE APPLICABLE TO SMALL COMPANIES WITH MODIFICATIONS
This is wishful thinking and if an effort is made by the Government to introduce this provision of small company then it will ensure that the interest of small &
Medium Enterprises who run their business is protected without their having to worry too much on compliance and the draconian penal provisions that may haunt them in case of any acts of errors of Omission & Commission.
While reading this article, please note that a small company is a private company but a private company need not be a small company. The provisions and issues of dealing with a private company may be different under the Companies Act, 2013.
A new and big concept has to be introduced to ensure “Make in India” happens alongwith “ease of doing business” in a big way for small entrepreneurs of this country.
This is one of the recommendation made by BJP CA Cell to the regulators, any views from readers is most welcome to improvise the applicable provisions to this concept of small companies.
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