The Ministry of Corporate Affairs (MCA) has announced significant amendments to the definition of “Small Companies” under the Companies Act, 2013, aiming to expand the scope of regulatory relief to a wider group of private entities. Effective May 22, 2025, the new thresholds increase the paid-up capital limit to ₹4 crore (from the earlier ₹2 crore) and the turnover ceiling to ₹40 crore (up from ₹20 crore) as per the latest audited financial statements. These changes are expected to benefit thousands of private limited companies, especially startups and small businesses, by reducing their compliance burden.

The revised classification allows eligible small companies to avail of simplified financial reporting requirements, exemption from cash flow statements, lesser penalties for defaults, and relaxed board meeting frequency norms. They will also face reduced filing fees and lighter internal audit obligations. The MCA has clarified that these benefits will be available only to companies that are not holding companies or subsidiary companies, and that are not governed by special regulatory frameworks such as banking or insurance.

Corporate professionals have welcomed the update, noting that it supports the ease of doing business agenda and provides cost-saving incentives for emerging enterprises. The change is expected to drive more private companies to formally re-evaluate their classification status and adjust internal systems to comply with the lighter regulatory regime. The government has urged businesses to update their records, financial filings, and board disclosures to the new thresholds to fully leverage these benefits.