Small Company as per Companies Act, 2013

Small Company as Per Companies Act, 2013

Small Company as Per Companies Act, 2013: The Companies Act from the year 2013 had brought to light the concept of Small Company. It has not specifically been registered with this particular name but is a private company with a small amount of investment and lesser turnover. In developing such as India, these companies play a prominent role.

About Small Company under the Companies Act of 2013

In accordance with the Companies Act 2013, a Small Company implies the company is going to satisfy the following conditions:

  • The company has a shared capital of not more than 50 lakhs or such a high amount as may be suggested, which shall not cross more than ten crores.
  • Its annual turnover is not more than the amount of 2 crores or such a huge amount as may be suggested that shall not cross more than ten crores.

For becoming a Small Company, a private company needs to fulfill these conditions.

Features of a Small Company

The following are the characteristics of a Small Company:

  • A small company is a private company.
  • The company has fewer employees.
  • The area of operation is limited.
  • The Companies Act from the year 2013 offers certain benefits to Small Companies.
  • The company has Separate legal entities from the owners.
  • A Small Company’s status might change in years as the capital and the turnover of the company also changes.

Privileges of Small Companies

The Companies Act of 2013 offers a few benefits to the Small Companies which involve:

  • Every company is needed to hold four board meetings each year. Whereas the Small Company requires to hold any 2-board meeting in an annum, i.e., one board meeting in each half of the year. The gap, however, between the two board meetings must not be less than 90 days.
  • A Small Company need not maintain a statement of cash flow as its Financial Statements part.
  • For Small Companies, the Annual Return can be chosen to be signed by the Secretary of the company alone, or in case there is no secretary, a single Director can also do the same.
  • The auditor of every company has to be changed by rotation according to Section 139(2) of the 2013 Companies Act. Small Companies, however, need not comply with this section and hence be exempted from the requirement of the section.
  • The Companies Act suggests lesser penalties in the case of a Small Company in comparison to any other company.
  • A Small Company is not needed to report in its Audit report about the Internal Financial controls and the company’s operating effectiveness.

Exceptions Made for Small Companies

A company is not considered as a Small Company when:

  • The company is a public company.
  • The company is a subsidiary of any other company.
  • The company has holdings from any other company.
  • The company is being governed by any other Special Act.
  • It is a Section 8 Company.

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