# Small Company — Section 2(85)
A 'Small Company' is a company (other than a public company) that satisfies BOTH thresholds AND is NOT in the excluded list.
## Quantitative tests (both must be satisfied)
| Test | Limit in the Act | Limit prescribed by Rules (current) |
|---|---|---|
| Paid-up share capital | Up to Rs.50 lakh, or such higher amount as prescribed (cannot exceed Rs.10 crore) | Rs.4 crore |
| Turnover (per P&L of immediately preceding FY) | Up to Rs.2 crore, or such higher amount as prescribed (cannot exceed Rs.100 crore) | Rs.40 crore |
Current effective thresholds: PUSC <= Rs.4 crore AND Turnover <= Rs.40 crore.
## Companies that can NEVER be Small Companies
The proviso excludes:
1. A Holding company;
2. A Subsidiary company;
3. A company registered under Section 8 (charitable);
4. A company / body corporate governed by any special Act.
## What 'public company' means here
A public company can never be a small company — small-company status is reserved for private companies (and OPCs which are private by default) meeting the thresholds.
## Why classification as 'Small Company' matters (benefits)
Small companies enjoy several relaxations:
- Lower additional fees on certain filings.
- Lesser penalties (under Sec 446B).
- Simplified annual return (Form MGT-7A).
- Cash flow statement not required.
- Fewer Board meetings (at least 1 per half-year).
- Auditor rotation under Sec 139(2) not applicable.
## Decision flowchart
```
Is it a public company? -> Yes -> NOT small
Is it a holding/subsidiary/Sec 8/special Act co.? -> Yes -> NOT small
Is PUSC <= Rs.4 cr AND Turnover <= Rs.40 cr? -> Both Yes -> Small Company
```