Stringent business norms spell bad news for small companies

NEW DELHI: The number of companies being registered under the new Companies Act could come down further as the government has made the norms more stringent for businesses to be classified as small companies. 

Under the new norms notified by the corporate affairs ministry, to classify as a small company, a company (other than a public company) should not have paid up capital exceeding Rs 50 lakh and turnover not more than Rs 2 crore. 

Under the earlier norms, a company meeting only one of these conditions would have qualified as a small company. "Under the new definition of small company, it would need to meet both the share capital and turnover criteria to be categorised as such. This is likely to take out several companies from the scope of the provisions of small companies under the Companies Act," said Sai Venkateshwaran partner, accounting advisory services at KPMG in India. 

There are number of exemptions including compliances and statutory requirements, which the government gives to small companies. In addition to filings, the number of board meeting was also another benefit available to small companies.