The government has broadened the definition of small companies, allowing a significantly larger pool of businesses to benefit from reduced compliance requirements and an expedited merger process.
In a recent notification, the Ministry of Corporate Affairs announced that firms with paid-up capital of up to Rs. 10 crore (US $ 1.11 million) and annual turnover of up to Rs. 100 crore (US $ 11.08 million) will now qualify as small companies. Previously, the thresholds stood at Rs. 4 crore (US $ 443,000) and Rs. 40 crore (US $ 4.43 million), respectively. The updated provisions fall under the Companies (Specification of Definition Details) Amendment Rules, 2025, and take effect immediately.
Experts noted that the revised criteria form part of the government’s wider push to enhance the ease of doing business in India. They emphasised that the relaxed norms would help smaller enterprises operate with fewer administrative hurdles, encouraging growth and formalisation.
However, they also pointed out that the Companies Act continues to exclude holding and subsidiary entities from being categorised as small companies, even if they meet the revised financial thresholds. According to experts, this limitation ensures the framework remains focused on supporting independent and standalone businesses rather than firms embedded within large corporate groups.
Under existing rules, small companies enjoy several compliance relaxations. They are exempt from preparing cash flow statements, may file a simplified board report, and pay lower fees for annual return filings and other statutory forms. Penalties for non-compliance are also lighter. Additionally, mergers between small companies can be completed through a fast-track process, and such firms are required to hold only two board meetings each financial year, with a minimum interval of 90 days.
