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

Ministry of Corporate Affairs, vide Gazette Notification no. G.S.R. 880(E) dated 1st December, 2025, expanded the “small company” bracket (₹10 Cr paid-up capital / ₹100 Cr turnover. With higher financial ceilings, a much larger segment of: 

• closely-held groups,

• family-run companies,

• promoter-driven private companies,

now qualify for regulatory relaxations—provided they are not:

• holding companies,

• subsidiary companies,

• section 8 companies,

• governed by special Acts,

• public companies.

Timing Matters: When Does “Small Company” Status Apply?

Small company status is determined:

• As on the last date of the financial year (31 March);

• Applies to the immediately following financial year — without any separate filing or approval requirement..

Mid-year restructuring or financial changes do not alter status immediately.

One Subsidiary Can Kill Small Company Status — But Divestment Restores It

If a company has even one subsidiary, it is ineligible to be a small company. However, if such subsidiary is sold:

• Company ceases to be a holding company;

• Structure-based disqualification is removed;

• If financial thresholds are met → small company status returns from next FY.

Similarly, the sold subsidiary may independently qualify if thresholds are met.

Real Benefits:

Becoming a “small company” triggers compliance relief across board:

Compliance Area	Provision of law	Comments
Auditor Report	Section 143(3)(i) of the Companies Act, 2013 read along with MCA notification no. G.S.R. 583(E) dated 13th June, 2017	Exemption from stating whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
Annual Return	Second Proviso to Sec 92(1) of the Companies Act, 2013	Abridged (Form MGT- 7A)
Annual Return signing	First Proviso to Sec 92(1) of the Companies Act, 2013	One director
Board Meetings	Section 173(5) of the Companies Act, 2013	Only 2 meetings per year
Board Report	Section 134(3A) of the Companies Act, 2013 read along with Rule 8A of the Companies (Accounts) Rules, 2014	Abridged
CARO	Companies (Auditor’s Report) Order, 2020	Not applicable
Cash Flow Statement	Proviso to Section 2(40) of the Companies Act, 2013	Not required
Penalties	Section 446B of the Companies Act, 2013	The company, its officer in default or any other person shall be liable to a penalty which shall not be more than one-half of the penalty specified in the provisions, subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person.
Professional certification	Rule 8(12) of the Companies (Registration Offices and Fees) Rules, 2014	The following forms are not required to be certified by CA/CS- INC-21, INC-22, INC-28, PAS-3, SH-7, CHG-1, CHG-4, CHG-9, MGT- 14,DIR-6, DIR-12, MR-1, MR-2, MSC-1, MSC-3, MSC-4, GNL-3, ADT-1, NDH-1, NDH-2, NDH-3, GNL-1, DPT-3, MGT-10, AOC-4
Rotation of Auditor	Section 139(2) of the Companies Act, 2013 read along with Rule 5 of the Companies (Audit & Auditors) Rules,2014	Not required

This translates into lower compliance cost, thinner paperwork, and reduced legal exposure.

What Does NOT Change Even if You Become a Small Company?

Despite becoming a small company:

• You cannot rematerialize shares already dematerialized;

• Beneficial ownership and reporting obligations still apply;

• Audit exemption does not arise.

For a client-friendly summary of all common questions, read the Small Company FAQ.