The Ministry of Corporate Affairs (MCA) has lately updated the definition of a “Small Company” under Section 2(85) of the Companies Act, 2013. This update was communicated to the public through its notification issued on 1 December 2025. The revision has been effected by amending Rule 2(1)(t) of the Companies (Specification of Definition Details) Amendment Rules, 2025. This amendment will be an advantage for a broader segment of companies, especially those in the startup and MSME ecosystems. There will be a reduction in the statutory burden on them, and other procedures will also be simplified as a result of this single update.
What Are the New Criteria for Small Company Status?
The revised limits take effect immediately upon the official notification. The guidelines to determine eligibility for a small company status have also changed as follows:
- Paid-up capital limit raised from ₹4 crore to ₹10 crore
- Turnover limit increased from ₹40 crore to ₹100 crore
By expanding this definition, the government aims to enable more businesses to benefit from relaxed compliance standards. More companies will now fall under the “small company” category.
Who Can’t Claim Small Company Status?
Despite the revised limits, specific categories of companies continue to be excluded, regardless of their capital or turnover:
- Public companies
- Holding and subsidiary companies
- Section 8 (non-profit) companies
- Companies governed by any special Act
This ensures that only independent, privately held entities benefit from the simplified framework.
Why This Amendment Matters?
Industry Experts see this move from the government as a long-term strategy to promote entrepreneurship. Since more companies will fall to small company status, the rules like
Board meetings, audits, and yearly filings will become simpler. Growing businesses that have surpassed prior limits can still benefit from lighter compliance. This update builds on earlier changes in 2022 and aims to create a healthier, more balanced corporate ecosystem nationwide.
In conclusion, this amendment sends a strong message that India is ready for the next phase of corporate growth. This prestigious move has prompted organizations to explore new opportunities and strengthen their operations without unnecessary complications. At its core, this update gives Indian businesses the space to breathe, build, and rise stronger. To know more such updates, you can check our finprov official website.
