The ministry of corporate affairs (MCA) has revised the definition of a small company by amending the Companies Rules. This was announced by Finance Minister Nirmala Sitharaman while presenting the Union Budget 2021-22.
Key Points
- This amendment in the Companies Act has revised the definition of small companies.
- This amendment will come into effect from April 1, 2021.
- As per the official notification, the turnover and paid-up capital of a small company should not exceed Rs 20 crores and 2 crores respectively.
- As per the previous definition of the small company defined by the Companies Act, such a company should have a turnover of Rs 2 crore and a maximum paid-up capital of Rs 50 lakh. This was applicable till the previous financial year.
- This change in the definition will lighten the compliance burden of around 200,000 companies.
One Person Companies
- The amendment in the Companies act also allows non-resident Indians to incorporate one-person companies (OPCs) in the country.
- Also, the residency limit of a person to qualify as a resident of India has been reduced.
- A person will qualify as a resident of the country if he stays for 120 days now. The previous residency limit was 182 days.
- Also, OPCs should be allowed to convert to any type of company at any time.
This amendment will be beneficial for startups. This will also attract more investments from NRIs.
Last Modified: February 10, 2024