The government has revised the paid-up capital and turnover thresholds for small companies that will help reduce the compliance burden on more entities.

The latest decision by the Ministry of Corporate Affairs (MCA), which is implementing the companies’ law, has again revised the definition of small companies and is aimed at further improving the ease of doing business.

With the amendments to certain rules, the threshold for small companies’ paid-up capital has been increased to “not exceeding Rs 4 crore” from “not exceeding Rs 2 crore”.

Similarly, the turnover threshold has been revised to “not exceeding Rs 40 crore” from “not exceeding Rs 20 crore”, the ministry said in a release on Friday.

Some of the benefits of reduction in compliance burden as a result of the revised definition for small companies are as under:

• No need to prepare cash flow statement as part of financial statement.
• Advantage of preparing and filing an Abridged Annual Return.
• Mandatory rotation of auditor not required.
• An Auditor of a small company is not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report.
• Holding of only two board meetings in a year.
• Annual Return of the company can be signed by the company secretary, or where there is no company secretary, by a director of the company.
• Lesser penalties for small companies.