Big Relief for Indian SMEs: MCA Raises “Small Company” Thresholds

In a major push towards improving the Ease of Doing Business, the Ministry of Corporate Affairs (MCA) has announced a significant relaxation in compliance norms for Small and Medium Enterprises (SMEs). By expanding the definition of a “Small Company”, the government has effectively shifted thousands of growing private companies into a lighter compliance framework, easing both regulatory pressure and operational costs.

This policy reform is a timely and strategic move. Instead of being weighed down by procedural requirements, eligible businesses can now redirect time, capital, and management bandwidth towards growth, innovation, and scale.

Revised Definition: What Has Changed?

The MCA has substantially enhanced the thresholds for determining a “Small Company”:

 These changes are notified via G.S.R. 880(E) and apply to private companies that satisfy both conditions and are not Public Companies, Holding/Subsidiary Companies, or Section 8 Companies.

What This Means for Your Business

If your company now falls within the revised thresholds, it becomes eligible for multiple compliance relaxations, including:

• Simplified Annual Return
  Filing of abridged Form MGT-7A instead of the detailed MGT-7.
• Exemption from CARO
  Auditors are not required to issue a report under the Companies (Auditor’s Report) Order (CARO), significantly simplifying audits.
• No Cash Flow Statement
  Financial statements need not include a cash flow statement.
• Fewer Board Meetings
  Requirement reduced to two board meetings per year—one in each half of the calendar year—instead of four.
• Lower Penalties
  Non-compliance penalties are generally substantially lower compared to other companies.