The Ministry of Corporate Affairs (MCA) has rolled out the Companies (Specification of Definition Details) Amendment Rules, 2025, bringing an important update to how Small Companies are identified under the Companies Act, 2013.
The revised rules take effect immediately upon their publication in the Official Gazette, marking another step by the government to ease compliance pressure on smaller entities and support the overall business ecosystem.
What the New Notification Changes
The amendment replaces clause (t) in Rule 2(1) of the Companies (Specification of Definition Details) Rules, 2014.
Under the updated definition:
A company will now be treated as a Small Company if:
- Its paid-up capital is ₹10 crore or below, and
- Its turnover is ₹100 crore or below
This revision directly influences the application of Section 2(85) of the Companies Act, which lays down the criteria for determining a small company.
Why This Update Is Significant
The enhanced thresholds are more than just revised numbers—they reshape the compliance landscape for thousands of companies. With wider eligibility, many growing businesses can now operate under the simplified regime meant for small companies.
Some major advantages include:
- Streamlined compliance obligations
Small companies enjoy fewer filings, simpler procedures, and reduced statutory requirements.
- Reduced penalties
The Companies Act prescribes lighter penalties for small companies, offering financial relief and minimizing legal risk.
- Fewer ROC disclosures
The compliance burden related to annual filings, reporting, and documentation becomes lighter.
- Exemption from internal financial controls reporting
This alone significantly cuts down audit complexity and cost.
- Only two board meetings a year
Companies no longer need to hold frequent meetings, provided there is a minimum 90-day gap.
By increasing the limits, MCA has allowed a much larger segment of businesses to qualify for these benefits.
How Businesses Will Be Impacted in 2025
1. More companies will now fall under the “small company” bracket
Earlier limits kept many early-stage and mid-level businesses out of this category. The revised criteria now include a broader range of MSMEs.
2. Growth-stage startups get additional breathing room
Startups that scale fast in terms of turnover—but still operate with lean teams—can continue enjoying relaxed compliance norms.
3. Incentive for small firms to incorporate
Traditional partnerships, family-run setups, and LLPs may now consider incorporation more attractive due to reduced regulatory load.
4. Lower operational costs
Audit fees, legal expenses, and secretarial compliance costs are expected to fall, allowing companies to redirect funds toward expansion.
Who Will Benefit Most From These New Rules?
- Newly formed private companies
- Startups in early and mid-growth phases
- MSMEs looking to scale operations
- Service-oriented and tech-focused businesses
- Family-run enterprises transitioning into formal structures
Companies with turnover below ₹100 crore and moderate capital requirements stand to gain the most from this policy shift.
Action Points for Companies and Compliance Teams
To take advantage of the new status, organisations should:
1. Re-evaluate financials
Check your current paid-up capital and turnover against the new thresholds.
2. Update ROC-related information
Your small company status will reflect in MCA records based on filings—ensure all filings are accurate.
3. Rework your compliance schedule
Reduced filings, simplified governance requirements, and fewer board meetings should be factored into internal calendars.
4. Inform key stakeholders
Management, auditors, secretarial teams, and advisors should be made aware of the updated classification.
5. Optimise cost structures
Make use of savings from reduced audit procedures and lighter compliance obligations.
A Major Push Toward Ease of Doing Business
With this move, MCA continues its steady effort toward creating a business-friendly environment. By expanding the small company definition, the government aims to accelerate formalisation, support entrepreneurial ventures, and minimise unnecessary compliance fatigue.
This amendment is in line with India’s broader reforms in simplifying corporate regulation and strengthening the MSME sector.
Conclusion
The Companies (Specification of Definition Details) Amendment Rules, 2025 bring a meaningful change to the corporate compliance landscape.
By raising the limits for paid-up capital and turnover, the MCA has widened the scope of small companies and provided them with significant procedural and financial relief.
For company secretaries, business owners, and compliance professionals, this is an ideal time to reassess the company’s classification and make the most of the new regulatory advantages.
