Government Raises Small Business Paid-up Capital Threshold under Ease of Doing Business
New Delhi: In a significant move, the Ministry of Corporate Affairs has once again revised the threshold limit for paid-up capital for “small businesses”.
Previously, the definition of “small businesses” under the Companies Act 2013 was revised by increasing their paid-up capital thresholds from “not exceeding Rs 50 lakh” to “not exceeding Rs 2 crore” and turnover from “not exceeding Rs 2 crore” to “not exceeding Rs 20 crore”. This definition has now been revised by increasing these thresholds for paid-up capital from “not exceeding Rs. 2 crores” to “not exceeding Rs. 4 crores” and turnover from “not exceeding Rs. 20 crores” to “not exceeding Rs. 40 crores”.
This initiative is part of the proactive measures taken recently by the government in favor of the ease of doing business and the life of enterprises.
These include the decriminalization of various provisions of the Companies Act 2013 and the LLP Act 2008, the extension of accelerated mergers to start-ups, the incentive for the formation of one-person companies (OPC) , etc.
Small businesses represent the entrepreneurial aspirations and innovative capacities of thousands of citizens and contribute significantly to growth and employment.
“The government has always been committed to taking measures that create a more conducive business environment for law-abiding businesses, including reducing the compliance burden for such businesses,” the ministry said.
Here are some of the benefits of reducing the compliance burden as a result of the revised small business definition:
* No need to prepare a cash flow statement as part of the financial statement
* Benefit of preparing and filing an abbreviated annual return
* Mandatory auditor rotation not required
* A small business auditor is not required to report on the adequacy of internal financial controls and its operating effectiveness in the auditor’s report
* Held only two board meetings per year
* The annual report of the company may be signed by the company secretary or, in the absence of a company secretary, by a director of the company
* Lower penalties for small businesses. (ANI)