The Department for Corporate Affairs (MCA) has further revised the definition of small companies under the Companies Act 2013, increasing the paid-up capital threshold from “not exceeding £2million” to “not exceeding £4million” and the Turnover from “not more than ₹20 crore” to “not more than ₹40 crore”.

The move aims to further simplify doing business and reduce the compliance burden for small businesses.

Small businesses represent the entrepreneurial aspirations and innovation skills of thousands of citizens and make a significant contribution to growth and jobs, the ministry says, adding that the government has always been committed to taking measures that create a more favorable business environment for compliance of the laws create companies, including reducing compliance burdens for such companies.

The government says some of the benefits of reducing compliance burdens as a result of the revised definition for small businesses are as follows:

• No need to prepare a cash flow statement as part of the financial statements.

• Advantage of preparing and filing an abbreviated annual return.

• No mandatory auditor rotation required.

• A small business auditor is not required to report on the adequacy of internal financial controls and operational effectiveness in the auditor’s report.

• Holding only two board meetings per year.

• The annual accounts of the company may be signed by the company secretary or, if there is no company secretary, by a director of the company.

• Smaller penalties for small businesses.

The Ministry of Enterprise Affairs has recently taken several measures to make business and life easier for enterprises. These included decriminalizing various provisions of the Companies Act 2013 and the LLP Act 2008, extending fast-track mergers to start-ups, incentivising the creation of one-person companies (OPCs), etc.

Meanwhile, the ministry registered more than 1.67 lakh business incorporations in the 2021-22 fiscal year, compared to 1.55 lakh businesses in the previous fiscal year. The increase is significant considering the number of companies formed in fiscal 21 was the highest in any previous year.

Incorporations during FY22 are 8% higher than incorporations during FY21. While MCA registered 1.24,000 companies and 1.22,000 companies in FY2019 and 2019-20, respectively, it had registered 1.55,000 companies in FY21 .

In 2021-22, the states with the most registrations were Maharashtra (31,107 companies), followed by Uttar Pradesh (16,969 companies), Delhi (16,323 companies), Karnataka (13,403 companies) and Tamil Nadu (11,020 companies).

On a sector basis, most companies were classified into business services (44,168 companies), followed by manufacturing (34,640 companies), municipal, personal and social services (23,416 companies) and agriculture and related activities (13,387 companies).