University · Companies Act 2013

Small Company Checker. Checker.

Sec 2(85): paid-up capital ≤ ₹4 crore AND turnover ≤ ₹40 crore, with the holding/subsidiary, Section 8 and special-Act exclusions — then the full bundle of exemptions small-company status unlocks.

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Company profile

Company type

Paid-up share capital (₹ crore)

Threshold: ≤ ₹4 crore

Turnover (₹ crore)

Threshold: ≤ ₹40 crore

Holding company?

Holds shares/control in another company

Subsidiary company?

Controlled by another company

Section 8 company?

Charitable / not-for-profit

Governed by a Special Act?

e.g. a statutory corporation constituted by its own Act

One test, two directions

Small company status and CARO exemption are not the same test entirely.

CARO 2020's small-company exemption ground and its own narrower private-company test are easy to conflate. CORAA's applicability engine runs both independently so a client isn't wrongly cleared — or wrongly flagged.

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How the Section 2(85) small-company test works

Section 2(85) of the Companies Act 2013 defines "small company" as a private company with paid-up share capital not exceeding ₹4 crore AND turnover, as per the last profit and loss account, not exceeding ₹40 crore — both conditions must be met simultaneously; either one being exceeded disqualifies the company. These thresholds were raised from ₹2 crore / ₹20 crore by the Companies (Specification of Definition Details) Amendment Rules 2022, effective 15 September 2022.

Four categories are excluded from the definition outright, regardless of how small their capital or turnover is: (a) a public company (the definition applies to private companies only); (b) a holding company; (c) a subsidiary company; (d) a company registered under Section 8; and (e) a company or body corporate governed by any Special Act. A holding or subsidiary company is excluded even if it is otherwise tiny — the exclusion is about corporate structure, not size.

Small-company status unlocks a defined bundle of compliance relief: no cash flow statement requirement, the abridged MGT-7A annual return, a listed ground for CARO 2020 exemption (separate from CARO's own narrower test), effective non-applicability of Section 139(2) auditor rotation in most cases, only 2 board meetings a year instead of 4, and exemption from ICFR reporting under Section 143(3)(i).

Worked example — a company just inside the thresholds

A private limited company has paid-up capital of ₹1.5 crore and turnover of ₹12 crore. It is not a holding or subsidiary company, not registered under Section 8, and not governed by any Special Act.

Inputs

Company typePrivate limited

Paid-up capital₹1.5 Cr (≤ ₹4 Cr ✓)

Turnover₹12 Cr (≤ ₹40 Cr ✓)

Exclusion gatesAll NO

Output

Small company (Sec 2(85))?Yes

Annual return formMGT-7A (abridged)

Board meetings required2 per year

ICFR reportingExempt under Sec 143(3)(i)

Both thresholds are met and none of the exclusion gates trigger, so the company qualifies as a small company and gets the full exemption bundle: no cash flow statement, MGT-7A instead of MGT-7, a CARO 2020 exemption ground, likely no Sec 139(2) rotation, 2 board meetings a year, and no ICFR reporting paragraph in the audit report.

Common mistakes

Testing capital and turnover but forgetting the structural exclusions

A holding or subsidiary company that is well within the ₹4 Cr / ₹40 Cr limits is still NOT a small company — the exclusion is about corporate structure (does it hold, or is it held by, another company), independent of size.

Conflating the small-company test with CARO's own private-company test

CARO 2020 gives a private company TWO independent routes to exemption: being a Sec 2(85) small company (this test, ₹4 Cr / ₹40 Cr), OR meeting CARO's own narrower test (paid-up capital + reserves ≤ ₹1 Cr, turnover ≤ ₹10 Cr, borrowings ≤ ₹1 Cr, not holding/subsidiary of a public company). These use different figures and different bases (capital alone vs. capital + reserves) — run both tests separately.

Assuming Sec 139(2) rotation exemption is a named carve-out

There is no line in Rule 5 that says "small companies are exempt from rotation." The practical result comes from the ₹4 Cr small-company capital ceiling sitting below the ₹50 Cr private-company rotation trigger — always check Rule 5's actual triggers (capital and public-borrowing thresholds) for the specific company rather than assuming exemption from the small-company label alone.

Missing that Section 8 companies are excluded regardless of size

A Section 8 company with ₹10 lakh capital and ₹50 lakh turnover is still not a "small company" under Sec 2(85) — the exclusion is absolute, unrelated to how small the entity actually is.

Frequently asked questions

What are the current small-company thresholds?+

Paid-up share capital not exceeding ₹4 crore AND turnover not exceeding ₹40 crore, per the last profit and loss account — both conditions must be satisfied together (Sec 2(85), as amended by the Companies (Specification of Definition Details) Amendment Rules 2022, effective 15 September 2022).

Can a public company ever be a small company?+

No. Section 2(85) defines "small company" as a category of private company. A public company can never qualify, regardless of how small its capital or turnover is.

Are holding and subsidiary companies excluded even if small in size?+

Yes — the exclusion for holding companies and subsidiary companies is absolute and based on corporate structure, not on capital or turnover. A tiny subsidiary of a large group does not qualify.

Is the CARO 2020 exemption the same as small-company status?+

No, though the two overlap. Being a Sec 2(85) small company is one listed ground for CARO 2020 exemption. CARO also has its OWN, separate private-company exemption test with narrower thresholds (paid-up capital + reserves ≤ ₹1 Cr, turnover ≤ ₹10 Cr, borrowings ≤ ₹1 Cr, not holding/subsidiary of a public company). A company can reach CARO exemption via either route independently.

Does small-company status automatically exempt a company from auditor rotation?+

Not by name — Rule 5 of the Companies (Audit and Auditors) Rules 2014 triggers rotation off paid-up capital and public-borrowing thresholds, not off the "small company" label. In practice a small company's capital (≤ ₹4 Cr) sits well below the ₹50 Cr private-company rotation trigger, so rotation typically does not apply — but this should be confirmed against Rule 5's actual triggers for the entity, not assumed from the label.

How many board meetings does a small company need?+

Only 2 a year — one in each half of the calendar year, with a gap of at least 90 days between them (Sec 173(5)) — instead of the standard minimum of 4 for other companies.

Authoritative sources

Section 2(85), Companies Act 2013 + Companies (Specification of Definition Details) Amendment Rules 2022 — Thresholds raised to ₹4 Cr / ₹40 Cr effective 15 September 2022. Read alongside Sec 2(40) (financial statement), Sec 92/Rule 11 (MGT-7A), Sec 139(2)/Rule 5 (rotation), Sec 173(5) (board meetings), Sec 143(3)(i) and MCA notification GSR 583(E) dated 13 June 2017 (ICFR reporting exemption).

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

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Last reviewed: 2026-07-29 · For informational purposes only — not professional advice.