Mahak Agarwal | corplaw@vinodkothari.com

Introduction

Recently, there has been considerable discussion regarding whether NBFCs can qualify as small companies. This debate erupts from point (c) of the proviso to Section 2(85) of the Companies Act, 2013 (‘the Act’), which excludes “a company or body corporate governed by any special Act” from being eligible as a small company.

Small is simple

Small companies are private companies operating on a small scale, having paid up share capital and turnover limits not exceeding Rs.4 crs and Rs.40 crs respectively. These companies contribute significantly to the economy, carrying the potential of becoming large corporations. The idea behind providing various relaxations to small companies was to remove the burden of additional compliances otherwise applicable to large public listed companies. The same has also been discussed in the 2005 Report on Company Law by Dr. J.J. Irani:

“The small companies have to be enabled to take quick decisions, be adaptable and nimble in the changing economic environment, yet be encouraged to comply with the essential requirements of the law through low cost of compliance. The Government may prescribe special regime for such companies through a system of exemptions.”