The Ministry of Corporate Affairs issued a notification on 15 October 2025 revising the thresholds for "small company" status under Section 2(85) of the Companies Act 2013. The revision raises the paid-up share capital threshold from Rs 4 crore to Rs 10 crore, and raises the turnover threshold from Rs 40 crore to Rs 100 crore. A company qualifies as a small company if it satisfies both thresholds simultaneously. Public companies, holding companies, subsidiary companies, and companies registered under Section 8 (not-for-profit) are excluded from small company status regardless of their financials. The practical effect of the threshold revision is that a substantially larger number of private limited companies in Delhi NCR now qualify as small companies and are entitled to the compliance relaxations available under the Act.
Compliance Relaxations Available to Small Companies
Small company status under the Companies Act 2013 entitles the qualifying company to a significant set of compliance relaxations. The most commercially material relaxation is the exemption from mandatory auditor rotation under Section 139. Listed companies and certain specified classes of companies are required to rotate their statutory auditor every five years (for individual auditors) or every ten years (for audit firms). Small companies are exempt from this requirement and may retain their auditor indefinitely, reducing the transition costs and disruption associated with mandatory rotation.
Small companies are also exempt from the requirement to constitute an audit committee, a nomination and remuneration committee, and a stakeholders' relationship committee under Sections 177 and 178. These committee requirements apply to public companies and to private companies above specified thresholds; small companies under the revised threshold — being private companies by definition — are not required to form these governance bodies. This is a meaningful cost and administrative relief for founder-led businesses where board governance resources are limited.
Annual return filing requirements are also simplified for small companies. Under Section 92, small companies may file an abridged annual return using Form MGT-7A rather than the full Form MGT-7, omitting the detailed shareholding pattern and related party transaction schedules required in the full form. Cash flow statement preparation — mandated under Schedule III of the Act — is not required for small companies, reducing the financial statement preparation burden.
The Cashflow Exemption and Its Limits
While small companies are exempt from the mandatory cash flow statement under the Companies Act, this exemption does not extend to cash flow statements required by other regulators or lenders. Banks and NBFCs extending credit facilities above specified limits typically require audited cash flow statements as a condition of the facility. Companies in this position must prepare cash flow statements for lender compliance even though the MCA does not require it. The statutory exemption relieves the formal MCA filing obligation but does not reduce the practical requirement in a credit context.
Impact on Private Companies in Delhi NCR
The MCA's own estimate suggests that the revised threshold will bring approximately 1.2 lakh additional private limited companies within the small company category across India. In Delhi NCR — which has one of the densest concentrations of private company registrations in the country, particularly in the Noida and Gurugram technology and services corridors — a significant proportion of companies that have grown beyond the previous thresholds without transitioning their compliance frameworks to the higher-obligation tier will now find themselves back within the small company perimeter. These companies should immediately reassess their compliance programme and identify where expenditure on committees, rotation, and extended annual return preparation can be rationalised.
For companies approaching the new thresholds — approaching Rs 10 crore paid-up capital or Rs 100 crore turnover — the small company exit point now has greater significance. Companies that cross the threshold must implement the full compliance programme in the financial year following the year in which they exceed both thresholds. Building governance infrastructure progressively, rather than reacting to threshold crossing, is the more prudent approach.
One Person Companies and Small Companies
The MCA notification also revised the threshold for One Person Companies (OPCs). OPCs that exceed a paid-up capital of Rs 50 lakh or a turnover of Rs 2 crore must mandatorily convert to a private limited company under Section 18. This threshold has been raised to Rs 4 crore paid-up capital and Rs 40 crore turnover, allowing more OPCs to remain in their single-member structure before the conversion obligation triggers. Founders of growing businesses operating as OPCs should model their projected capital and turnover trajectory against the revised thresholds.
Action Items for Delhi NCR Private Companies
- Check whether your company now qualifies as a small company under the revised Rs 10 crore / Rs 100 crore thresholds and, if so, assess which compliance obligations can be rationalised.
- Review auditor engagement terms — if you were rotating auditors due to the mandatory rotation requirement, confirm whether that obligation now applies given your small company status.
- Dissolve any compliance committees constituted solely to meet Section 177/178 requirements if your company now qualifies as small and is no longer required to maintain them.
- Switch to Form MGT-7A for the next annual return filing cycle if small company status now applies.
- For companies approaching the new thresholds, begin governance infrastructure planning to ensure a smooth transition when thresholds are exceeded.