The Ministry of Corporate Affairs (MCA) has broadened the definition of a “small company” under the Companies Act, 2013. As per a new notification (G.S.R. 880(E), issued 1 December 2025), entities with a paid-up capital up to ₹10 crore and annual turnover up to ₹100 crore will qualify as small companies.
This update significantly expands the scope from the previous threshold of ₹40 crore turnover and ₹4 crore paid-up capital. The Tribune
✅ What Changes — And Who Benefits
Lower Compliance Burden
Companies now qualifying as small entities will enjoy relaxed compliance and regulatory requirements. These firms often face fewer statutory obligations related to audit, board composition, and reporting — which can reduce cost and administrative complexity.
More Firms Eligible
Many mid-sized firms with turnover near ₹100 crore — especially private companies, startups in growth phase, tech-service firms, and SMEs scaling fast — might now fall under the “small company” category.
Ease of Doing Business Push
The amendment aligns with broader efforts to ease business formalities, encourage entrepreneurship, and make regulatory compliance simpler for growing but not-large enterprises.
📌 Key Details of the New Definition
| Criterion | Previous Limit | New Limit (from 01 Dec 2025) |
|---|---|---|
| Paid-up Share Capital | ₹4 crore | ₹10 crore |
| Annual Turnover | ₹40 crore | ₹100 crore |
To qualify as “small company,” a firm must meet both criteria simultaneously.
💡 What It Means for Business & Industry
- Growing SMEs get relief: Firms that recently outgrew old thresholds now regain “small company” status, which can reduce compliance burden and overhead costs.
- Encourages formalisation: Smaller and mid-size businesses have an incentive to register formally, hire staff, and scale — knowing compliance remains manageable.
- Better environment for startups: Startups and scaling companies that hit ~₹50–₹100 crore revenue but want to stay lean in compliance can benefit while they grow further.
- Potential boost for M&A and restructuring: With more companies listed as small firms, simplified rules may make mergers, restructuring or raising funds easier for mid-size entities.
📈 Broader Context: Why the Rule Changed
The threshold increase is part of the government’s ongoing push to ease doing business, reduce red tape, and encourage growth among SMEs and small-to-mid corporates. Analysts say the move can help a large number of firms that have scaled but still aren’t big enough to handle heavy compliance burdens.
With inflation, rising costs, and competition — easing regulatory load can help firms reinvest savings into expansion and hiring.
⚠️ What to Watch: Limitations & Conditions
- Not all companies with ₹100 crore turnover will qualify: Entities must also have paid-up capital ≤ ₹10 crore.
- Certain firms remain excluded: Public companies, holding / subsidiary companies, or companies governed by special statutes may not be eligible under small-company classification, even if they meet financial thresholds.
- Benefits are tied to compliance rules under the Companies Act — other regulations (tax, labour, GST, sectoral laws) still apply depending on business type and scale.
🔎 What Small-Company Status Means in Practice
- Simpler reporting and filing requirements
- Lower regulatory compliance costs
- Easier corporate governance (fewer board/committee obligations)
- More flexibility for growing SMEs — giving them breathing room to scale
For many mid-sized Indian firms — across services, manufacturing, tech, retail — this re-classification could provide a meaningful operational advantage during growth phases.
