FreeCompliance

Small company under the Companies Act: definition and benefits

1 min read

Most early-stage private companies in India are small companies under Section 2(85) of the Companies Act. The status matters: it cuts down board meetings, filings and penalties.

Definition

A small company is a company, other than a public company, with:

  • Paid-up share capital of not more than ₹10 crore, and
  • Turnover as per the profit and loss account for the preceding financial year of not more than ₹100 crore.

Holding and subsidiary companies, Section 8 companies, and companies governed by special Acts are excluded.

These limits were raised from ₹4 crore and ₹40 crore by an amendment to the Companies (Specification of Definition Details) Rules notified on 1 December 2025.

Benefits

  • No cash flow statement required in financial statements.
  • Only two board meetings a year, one in each half.
  • Abridged annual return in MGT-7A.
  • Auditor rotation does not apply.
  • Lower government filing fees.
  • Penalties under many sections are capped at half (Section 446B).
  • Exempt from the mandatory demat requirement for private companies.
  • Fast-track mergers with other small companies.

Frequently asked questions

Yes. It depends on paid-up capital and the latest turnover, so check it every year.

Only if it meets the capital and turnover tests and is not a holding or subsidiary company.

This guide is general information, not legal advice. Government fees and procedures change; confirm current figures before you file.

Read next