MCA revises Paid-Up Capital Threshold for Small Companies, Minimises Regulatory Load

In recent years, the Ministry of Corporate Affairs (MCA) has made several steps to improve the corporates’ ease of doing business. These included the decriminalisation of several aspects of the Companies Act, 2013 and the Limited Liability Partnership Act, 2008, the extension of fast track mergers to start-ups, and the encouragement of creation of One Person Companies (OPCs), among others.

Previously, the definition of “small firms” under the 2013 Companies Act was updated by increasing the limits for paid-up capital from “not surpassing Rs 50 lakh” to “not exceeding Rs 2 crore” and for annual revenue from “not exceeding Rs 2 crore” to “not exceeding Rs 20 crore.” This definition has been updated by changing the limits for paid-up capital from “less than 2 crore rupees” to “less than 4 crore rupees” and for revenue from “less than 20 crore rupees” to “less than 40 crore rupees.”

Small businesses reflect the entrepreneurial ambitions and innovative capabilities of millions of individuals and significantly contribute to economic growth and employment. The government has always been dedicated to implementing steps that foster a more hospitable business climate for law-abiding enterprises, including a decrease in their compliance burden.

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