Definition of a Small Company Under Companies Act, 2013

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Current Statutory Limits and Mandatory Exclusions Under Section 2(85).

The definition of a "small company" is crucial under the Companies Act, 2013, as it grants several exemptions and reduced compliance requirements. The Central Government recently revised the thresholds, significantly expanding the scope of companies that qualify as "small."

Statutory Definition and Amended Limits

As per Section 2(85) of the Companies Act, 2013, a small company is any company, other than a public company, that meets the specified limits for paid-up share capital and turnover.

Current Financial Thresholds (As Amended w.e.f. 1st December 2025):

The Central Government, through Notification G.S.R. 880(E) dated 1st December 2025, substituted the limits for the purposes of the Act:

  • Paid-up Share Capital [Sec. 2(85)(i)]: Shall not exceed rupees ten crores. (Original limit was 50 lakh rupees, maximum prescribed limit is 10 crore rupees).
  • Turnover [Sec. 2(85)(ii)]: Shall not exceed rupees one hundred crores. (Original limit was 2 crore rupees, maximum prescribed limit is 100 crore rupees).

Mandatory Exclusions (The Proviso)

The Companies Act explicitly states that the "small company" classification does not apply to certain types of companies, irrespective of their capital and turnover limits:

The Proviso: Exceptions to Section 2(85)

  • A holding company or a subsidiary company.
  • A company registered under section 8 (Non-Profit Companies).
  • A company or body corporate governed by any special Act.

Key Takeaway 💡

This amendment is a major relief, significantly widening the pool of companies eligible for reduced compliance, which includes exemptions from rotational auditors, lesser penalties, and simpler annual returns. Corporate advisers must check if their client's paid-up capital does not exceed Rs. 10 Crores AND their turnover does not exceed Rs. 100 Crores to utilize the beneficial provisions, while ensuring they do not fall under the statutory exceptions like being a holding or subsidiary company.

Source: Section 2(85) of the Companies Act, 2013; MINISTRY OF CORPORATE AFFAIRS NOTIFICATION G.S.R. 880(E), Dated: 1st December, 2025.

Statutory Reference: Section 2(85) of the Companies Act, 2013.

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