More firms to have reduced compliance burden as govt revises norms

The government has revised the paid-up capital and turnover thresholds for small companies that will help reduce the compliance burden on more entities.

The latest decision by the corporate affairs ministry, which is implementing the companies law, has again revised the definition of small companies and is aimed at further improving the ease of doing business.

With the amendments to certain rules, the threshold for small companies’ paid-up capital has been increased to “not exceeding Rs 4 crore” from “not exceeding Rs 2 crore”.

Similarly, the turnover threshold has been revised to “not exceeding Rs 40 crore” from “not exceeding Rs 20 crore”, the ministry said in a release on Friday.

The revisions will allow more entities to come under the category of small companies.

According to the ministry, small companies are exempted from the requirement to prepare cash flow statement as part of financial statement and can file an abridged annual return.

They will not be required to have the mandatory rotation of auditors.

An auditor of a small company is not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report, and such companies need to hold only two board meetings in a year, the release said.

Other advantages are that there are lesser penalties for small companies and annual returns of such entities can be signed by the company secretary, or where there is no company secretary, by a director of the company.

“Small companies represent the entrepreneurial aspirations and innovation capabilities of lakhs of citizens and contribute to growth and employment in a significant manner.

“The government has always been committed to taking measures which create a more conducive business environment for law-abiding companies, including reduction of compliance burden on such companies,” the release said.

In recent times, the government has taken various measures, including decriminalisation of various provisions under the companies law, to further improve the ease of doing business in the country.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor