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Presently, as per sub-section (i) of section 2(85) of the Companies Act, 2013, a small company has been defined to mean a company other than a public company which fulfills either of the two conditions:

(i) Paid up share capital of the company does not exceed fifty lakh rupees or such higher amount as may be prescribed not exceeding Rs. five crores;

(ii) Turnover of the company as per its last profit and loss account does not exceed two crores rupees or such higher amount as may be prescribed which shall not be more than twenty crores rupees.

The definition given in the said clauses suggested that the both the above conditions are independent and by fulfilling any of the condition the companies could qualify as ‘small company’

However, by the order of the Ministry of Corporate Affairs (MCA) dated 13-02-2015, the definition of “small company” under section 2(85) of the Companies Act, 2013 has been amended.

The need of the amendment, as stated by the order is as under:

‘According to clause (85) of section 2, a company may be treated as a 'small company' if it meets either of the conditions provided therein thereby making the second limit unrestricted or inconsequential. Difficulties have arisen in this regard as companies which, though, meet one of the criteria but exceed the monetary limit in respect of second criteria excessively are also getting classified as 'small companies'

Therefore, now the conditions of paid up share capital and turnover have been made mutually dependent and to qualify as ‘small company’ both the conditions are required to be fulfilled instead of anyone of them as per hitherto

The relevant extract of the order dated 13-02-2015 are as under:

Now, therefore, in exercise of the powers conferred by sub-section (1) of section 470 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following Order to remove the aforesaid difficulties, namely: - (1) Short title and commencement.- (1) This Order may be called the Companies (Removal of Difficulties) Order, 2015.
(2) It shall come into force on the date of its publication in the Official Gazettee

2. In the Companies Act, 2013 (hereinafter referred to as the said Act),-
(a) in section 2, in clause (85), in sub-clause (i), for the word "or" occurring at the end, the word "and" shall be substituted

[F No. 1/13/2013-CL.V-Part]

Download the Order Click Here >>

Also Read:
MCA Order ection 186 Amendment related to Banking Insurance Housing Finance Cos Click Here >>

MCA Order-Small Companies Criteria of Paid-up Share Capital and Turnover under Section 2(85) Made Mutually Inclusive and Interdependent | 16-02-2015|