FAQS On Small Company (Practical questions from CS / CFO / Promoters)

Q1: What is the new definition of a “Small Company”?

Response: A company is treated as a small company if:

  • It is a private company;
  • Paid-up capital does not exceed ₹10 crore;
  • Turnover does not exceed ₹100 crore.

It is not:

  • a holding company;
  • a subsidiary company;
  • a Section 8 company;
  • governed by any Special Act.

Q2: From when do the revised limits apply?

Response: Eligibility shall be checked as on 31st March, 2026 and the benefits/ exemptions shall apply for the following financial year i.e. FY 2026-27 onwards based on the MCA notification.

Q3: If my company crosses ₹10 crore capital or ₹100 crore turnover in the middle of the year, does it immediately lose “small company” status?

Response: No. Eligibility is tested only on 31st March. Your status for the current year remains unchanged.

Q4: If my company falls below the thresholds during the year, does it immediately become a small company?

Response: No. Becoming a small company happens only from the next financial year after satisfying conditions as on 31 March.

Q5: My company had one subsidiary earlier. If we sell it, do we become a small company immediately?

Response: No. Mid-year changes (sale of subsidiary / capital change) do not alter status instantly. You may qualify from the next financial year if you satisfy financial thresholds and are not a holding/subsidiary on 31st March.

Q6: Can both the parent and sold subsidiary qualify independently?

Response: Yes—if each, separately, meets the definition on 31st March:

  • Private company;
  • Within ₹10 Cr paid-up capital and ₹100 Cr turnover;
  • Not holding or subsidiary.

Q7: The Company dematerialized shares. Can it rematerialize now?

Response: No. Dematerialization is irreversible once completed. 

Q8: Do we still need statutory audit as a small company?

Response: Absolutely. Small company status does not exempt audit.

Q9: Are Internal Financial Controls (IFC) completely irrelevant for small companies?

Response: Not eliminated—only reporting is exempt. Governance responsibility remains with management.

Q10: Are penalties actually lower for small companies?

Response: Yes. Caps apply, but defaults are still punishable. Small company status is not immunity from compliance.

Q11: Does professional certification truly disappear for filings in case of a small company?

Response: Yes, for many routine forms. Small companies are exempt from CA / CS / CMA certification for several filings such as: PAS-3, DIR-12, AOC-4, MGT-7, INC-22, ADT-1 (subject to latest MCA rules in force).

Q12: Can a small company sign its Annual Return with one director if there is no Company Secretary?

Response: Yes. One director can sign the Annual Return.

Q13: Can the status change every year?

Response: Yes. A company can become: 

  • small;
  • cease to be small; 
  • re-qualify in later years, 

depending on:

  • structure;
  • turnover;
  • capital, 

tested every 31 March.


More Resources: Small Company under the Companies Act, 2013 — New Thresholds and What Changes in Practice


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