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Companies Act

Corporate Laws (Amendment) Bill, 2026: “Small Company” Thresholds Proposed to Rise to ₹20 Crore Capital / ₹200 Crore Turnover

Published 11 Aug 2026· 6 min read

Clause 18 of the Corporate Laws (Amendment) Bill, 2026 — introduced in the Lok Sabha on 23 March 2026 by Finance and Corporate Affairs Minister Nirmala Sitharaman and currently pending before a Joint Parliamentary Committee — proposes to amend Section 2(85) of the Companies Act, 2013 to raise the "small company" thresholds from ₹10 crore paid-up share capital / ₹100 crore turnover to ₹20 crore paid-up share capital / ₹200 crore turnover. This follows an MCA notification effective 1 December 2025 that had already raised the limits from ₹4 crore/₹40 crore to the current ₹10 crore/₹100 crore. If enacted, a significantly larger population of private companies would qualify for the compliance relaxations available to small companies, while the statutory exclusions for holding companies, subsidiary companies, Section 8 companies and companies governed by a special Act would continue to apply regardless of financial size.

Background

Section 2(85) of the Companies Act, 2013 defines a "small company" as a company (other than a public company) whose paid-up share capital and turnover do not exceed prescribed ceilings, subject to a proviso excluding holding companies, subsidiary companies, Section 8 companies, and companies or bodies corporate governed by a special Act. The prescribed ceilings have risen in stages: from the original ₹50 lakh/₹2 crore, to ₹2 crore/₹20 crore (2021 amendment), to ₹4 crore/₹40 crore (2022 amendment), to the current ₹10 crore/₹100 crore under the Companies (Specification of Definitions Details) Amendment Rules, 2025, effective 1 December 2025. The Corporate Laws (Amendment) Bill, 2026 — a 107-clause bill amending the Companies Act, 2013 and the LLP Act, 2008, aimed at reducing compliance and litigation burden and replacing several criminal sanctions for minor/technical lapses with civil penalties — proposes, in Clause 18, to raise these thresholds further to ₹20 crore paid-up capital and ₹200 crore turnover. The Bill has been referred to a Joint Parliamentary Committee for detailed scrutiny and has not yet been passed.

Why It Matters

The "small company" classification unlocks a meaningful package of compliance relaxations under the Companies Act, 2013 — simplified annual return and Board’s Report requirements, exemption from preparing a cash-flow statement where applicable, the reduced penalty regime under Section 446B where applicable, and relaxation from mandatory auditor rotation where the relevant provisions apply, among other procedural benefits. Because the proposed ₹20 crore/₹200 crore thresholds are double the current limits, a substantially larger band of mid-sized private companies — not just very small entities — would newly qualify if the Bill is enacted as currently drafted. For CA firms advising private companies approaching or within this expanded range, this is directly relevant to medium-term compliance and structuring planning, even though the Bill remains at the Joint Parliamentary Committee stage and is not yet law.

Key Takeaways

  • Clause 18 of the Corporate Laws (Amendment) Bill, 2026 proposes raising Section 2(85) "small company" thresholds from ₹10 crore/₹100 crore to ₹20 crore paid-up capital/₹200 crore turnover.
  • This would be the fourth increase in the small-company thresholds since the Companies Act, 2013 came into force: ₹50 lakh/₹2 crore → ₹2 crore/₹20 crore (2021) → ₹4 crore/₹40 crore (2022) → ₹10 crore/₹100 crore (MCA Rules, effective 1 Dec 2025) → proposed ₹20 crore/₹200 crore (2026 Bill).
  • The statutory exclusions under the proviso to Section 2(85) — holding companies, subsidiary companies, Section 8 companies, and companies/bodies corporate governed by a special Act — are not affected by the proposed amendment and would continue to apply irrespective of the company’s financial size.
  • The Bill is currently before a Joint Parliamentary Committee and has not been enacted — the proposed limits are not yet in force and should not be applied in current compliance work.
  • If enacted, small-company status would unlock benefits including simplified annual return/Board’s Report requirements, cash-flow statement exemption where applicable, the Section 446B reduced-penalty regime where applicable, and auditor-rotation relaxation where applicable — but does not exempt a company from all statutory compliance.

Practical Implications

Firms should begin identifying clients whose paid-up capital and turnover fall within the proposed ₹20 crore/₹200 crore band but exceed the current ₹10 crore/₹100 crore limits, so that compliance-planning conversations can start now — while being explicit with clients that the higher thresholds are not yet law and remain subject to change during Joint Parliamentary Committee review and subsequent passage. Firms should also continue to check the four standard exclusions (holding, subsidiary, Section 8, special-Act companies) before advising any client that small-company status will apply, since satisfying the financial thresholds alone is not sufficient.

Action Checklist

  • Identify clients with paid-up capital between ₹10 crore–₹20 crore and/or turnover between ₹100 crore–₹200 crore who would newly qualify as small companies if the Bill is enacted as currently drafted.
  • For each such client, confirm none of the four statutory exclusions (holding company, subsidiary company, Section 8 company, special-Act company) applies.
  • Track the Joint Parliamentary Committee’s report and the Bill’s subsequent passage before advising any client to rely on the ₹20 crore/₹200 crore thresholds.
  • Continue applying the current ₹10 crore/₹100 crore thresholds for all present compliance and classification purposes until the amendment is enacted and notified.
  • Flag the potential future benefits (simplified annual return, cash-flow statement exemption, Section 446B penalty regime, auditor-rotation relaxation) to affected clients as forward-looking, not current, relief.

Relevant Sections / Rules / Notifications

  • Section 2(85), Companies Act, 2013 (definition of "small company")
  • Rule 2(1)(t), Companies (Specification of Definitions Details) Rules, 2014, as amended by the Companies (Specification of Definitions Details) Amendment Rules, 2025, effective 1 December 2025 (current ₹10 crore/₹100 crore limits)
  • Section 446B, Companies Act, 2013 (reduced penalties for small companies and OPCs)
  • Clause 18, Corporate Laws (Amendment) Bill, 2026, introduced in the Lok Sabha 23 March 2026, currently before a Joint Parliamentary Committee

FAQs

Q: Are the ₹20 crore/₹200 crore thresholds already in effect?

A: No. The Corporate Laws (Amendment) Bill, 2026 is currently before a Joint Parliamentary Committee and has not been passed or notified. The current thresholds remain ₹10 crore paid-up capital and ₹100 crore turnover.

Q: Will a subsidiary company with capital and turnover within the proposed ₹20 crore/₹200 crore range qualify as a small company once the Bill is enacted?

A: No. The proviso to Section 2(85) excludes holding companies, subsidiary companies, Section 8 companies, and companies/bodies corporate governed by a special Act, irrespective of their financial size. This exclusion is not affected by the proposed amendment.

Q: What compliance relief does small-company status actually provide?

A: Depending on the specific provision and applicable rules, it can include simplified annual return and Board’s Report requirements, exemption from preparing a cash-flow statement, the reduced penalty regime under Section 446B, and relaxation from mandatory auditor rotation — but small-company status does not exempt a company from all statutory compliance obligations.

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Prepared by Finoscape Editorial Team — contact@finoscape.com. This article is for general informational purposes and does not constitute legal or tax advice. The Corporate Laws (Amendment) Bill, 2026 has not been enacted; readers should verify the Bill’s current status with the Ministry of Corporate Affairs and PRS Legislative Research before relying on this analysis for any specific matter.

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