The Ministry of Corporate Affairs (MCA) has introduced an important amendment to the Companies (Specification of Definition Details) Rules, 2014, redefining the financial thresholds that determine what qualifies as a small company under the Companies Act, 2013. This change comes through the newly notified Companies (Specification of Definition Details) Amendment Rules, 2025, effective from its publication in the Official Gazette.
This update reflects the government’s continued efforts to simplify regulatory compliance, encourage entrepreneurship, and support the growth of India’s burgeoning MSME sector. Here’s a breakdown of the notification and its implications.
What Has Changed?
Under the amendment, Rule 2(1)(t) of the 2014 Rules has been substituted with a new clause. The new definition provides that, for the purposes of section 2(85)(i) and (ii) of the Companies Act:
- A small company is one whose paid-up capital does not exceed ₹10 crore, and
- Whose turnover does not exceed ₹100 crore.
These thresholds mark a significant upward revision from earlier limits, continuing the government’s trend of easing compliance for a wider set of companies.
Why Is This Amendment Important?
The redefined thresholds offer several clear advantages:
1. Expanded Eligibility for Small Company Benefits
By increasing the financial limits, the MCA is bringing a larger number of private companies under the “small company” classification. This status brings substantial compliance relief, including:
- Less stringent financial reporting requirements
- Exemption from auditor rotation
- Simplified board meeting rules
- Reduced penalties for non-compliance
- Lower filing fees
This move is particularly beneficial for startups and fast-growing businesses that often scale quickly but still face resource constraints.
2. Boost to Ease of Doing Business
The government has consistently emphasized reducing the regulatory burden on smaller enterprises. Revising these thresholds supports entrepreneurial activity and operational flexibility, helping young companies focus on innovation and expansion rather than procedural complexities.
3. Support for MSME Growth
Most private limited companies in India fall within the MSME ecosystem. By expanding the definition of a small company, the amendment aligns corporate law benefits with MSME policy priorities, enabling businesses to grow without immediately facing heavier compliance challenges.
Effective Immediately
The amendment rules are effective from the date of their publication in the Official Gazette—December 1, 2025. Companies that fall within the revised criteria will benefit from the simplified compliance regime right away for financial and regulatory filings.
A Step Toward Modernizing Corporate Regulation
This revision underscores the MCA’s commitment to keeping corporate laws responsive to economic realities. The earlier definition of small company, though revised periodically, needed to keep pace with inflation, industry growth, and the rising scale of Indian enterprises.
By modernizing the thresholds, the 2025 Amendment Rules ensure that regulatory compliance remains proportionate, encouraging more businesses to formalize, grow, and contribute to the economy without undue administrative strain.