Compliances by Small Companies Under the Companies Act, 2013

 

Key compliance requirements, exemptions, and procedures.

1. Understanding Small Companies

A Small Company is defined under Section 2(85) of the Companies Act, 2013 based on thresholds of paid-up capital not exceeding ₹4 crore and turnover not exceeding ₹40 crore. Exclusions apply to public companies, holding/subsidiary companies, Section 8 companies, and companies under special Acts.

2. Incorporation and Commencement of Business

Small companies follow the standard incorporation process using SPICe+ forms. Required steps include name reservation, registered office verification, first Board Meeting within 30 days, and filing of Form INC-20A declaring receipt of subscription money.

3. Key Exemptions Available to Small Companies

Major benefits include exemption from cash flow statements, abridged annual return (MGT-7A), simplified Board’s Report, exemption from CARO 2020, relaxed auditor appointment limits, and reduced internal audit applicability.

4. Mandatory Registers and Records

Small companies must maintain statutory registers including Register of Members, Register of Charges, Significant Beneficial Owners, and other prescribed registers at the registered office.

5. Share Capital and Securities Compliance

Compliances include issuing share certificates within statutory timelines, adherence to rules for bonus/right issues, prohibition on discounted share issuance (except sweat equity), and redemption norms for preference shares.

6. Meetings and Resolutions

Includes requirements for Board Meetings, AGMs, notice periods, quorum, special business explanatory statements, and filing of resolutions in Form MGT-14 wherever applicable.

7. Financial Statements and Annual Filings

Small companies file financial statements via AOC-4 and annual returns via MGT-7A. Cash flow statements are exempt. First auditor and subsequent auditors must be appointed as per statutory timelines.

8. Other Important Compliances

Includes deposit rules, charge registration, dividend declaration and transfer to unpaid dividend account, and obligations related to beneficial ownership filings.

9. MSME Udyam Registration

Small companies may register under Udyam for MSME benefits based on investment and turnover criteria. Classification includes Micro, Small, and Medium categories.