# Section 2(85) — Small Company
## Concept
The 'small company' concept was introduced in the Companies Act, 2013 to give regulatory relief to genuinely small private companies. They enjoy several relaxations (e.g., abridged Board's report, fewer Board meetings, exemption from cash flow statement, lower penalties under Section 446B, etc.).
## Statutory Definition (as amended)
> 'Small company' means a company, other than a public company, —
> (i) paid-up share capital of which does not exceed ₹4 crore or such higher amount as may be prescribed which shall not be more than ₹10 crore; and
> (ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed ₹40 crore or such higher amount as may be prescribed which shall not be more than ₹100 crore.
## Current Thresholds (as per Companies (Specification of Definitions Details) Rules, post-2022 amendment)
| Criterion | Limit |
|---|---|
| Paid-up share capital | Not exceeding ₹4 crore |
| Turnover | Not exceeding ₹40 crore |
> ⚠️ Both conditions must be satisfied simultaneously.
## Companies that CANNOT be a Small Company (Excluded)
The following are expressly excluded even if they meet the size thresholds:
1. A Public Company — small company is by definition a private company.
2. A Holding Company or a Subsidiary Company.
3. A company registered under Section 8 (companies with charitable objects).
4. A company or body corporate governed by any Special Act.
## Why exclude these?
- Public companies & their subsidiaries are presumed to have a wider public interest — they should not enjoy small-company relaxations.
- Section 8 companies have a separate concessional regime.
- Companies under special Acts (e.g., banking, insurance) have their own compliance framework.
## Benefits of being a Small Company
- No need to prepare Cash Flow Statement as part of financial statements.
- Annual Return can be signed by a Director (CS not required).
- Only 2 Board Meetings per year are required (instead of 4).
- Lesser penalties under Section 446B (half the penalty applicable to other companies).
- No mandatory rotation of auditors.
- Abridged Board's report.