# Small Company [Section 2(85)]
## Concept
A Small Company is essentially a private company that meets prescribed threshold limits of paid-up capital and turnover. The classification provides regulatory relief — fewer compliance burdens, simpler procedures.
## Definition – Section 2(85)
A small company means a company, other than a public company, which satisfies BOTH the following conditions:
| Criterion | Threshold |
|---|---|
| Paid-up share capital | Not exceeding ₹4 crore (or such higher amount as prescribed, subject to a maximum of ₹10 crore) |
| Turnover (as per P&L of immediately preceding F.Y.) | Not exceeding ₹40 crore (or such higher amount as prescribed, subject to a maximum of ₹100 crore) |
## Exclusions – Who Cannot be a Small Company
Even if the thresholds are met, the following can never be small companies:
1. A holding company or a subsidiary company
2. A company registered under Section 8 (non-profit company)
3. A company or body corporate governed by any Special Act
## Key Points to Remember
- A small company is always a private company — public companies are excluded by definition.
- Both the paid-up capital test AND the turnover test must be satisfied. Failing either disqualifies the company.
- The thresholds use the words "does not exceed," so a company at exactly ₹4 crore paid-up capital qualifies; one at ₹4.01 crore does not.
- The ceiling values (₹10 crore / ₹100 crore) represent the upward limit the Government may prescribe via rules; the current rule-prescribed limits are ₹4 crore and ₹40 crore respectively.
## Why This Matters (Pedagogical Insight)
Small companies enjoy relaxations such as: simpler board meeting requirements (only 2 meetings a year with a 90-day gap), exemption from cash flow statement, abridged annual return, etc. Recognising whether a company qualifies as "small" affects almost every compliance question in CA Inter Law.