Small Company Threshold Doubled to ₹20 Crore Capital Under Corporate Laws Amendment Bill 2026
🏢 Small Company Threshold Doubled to ₹20 Crore Capital Under Corporate Laws Amendment Bill 2026
The definition of a “Small Company” under the Companies Act, 2013 could undergo a significant change if the Corporate Laws (Amendment) Bill, 2026 is enacted in its present form.
The Bill proposes to increase the statutory upper limit for the paid-up share capital of a small company from ₹10 crore to ₹20 crore and the turnover ceiling from ₹100 crore to ₹200 crore.
The proposal is significant because companies classified as small companies can benefit from various compliance relaxations under the Companies Act and related rules.
However, there is an important point that businesses must understand before changing their current compliance position: the ₹20 crore and ₹200 crore limits are proposed changes, not the current operative thresholds.
The Bill was introduced in the Lok Sabha on 23 March 2026 and has been referred to a Joint Parliamentary Committee (JPC) for examination.
Key takeaway: The Bill proposes ₹20 crore paid-up capital and ₹200 crore turnover as the new statutory upper limits, but companies should continue applying the current ₹10 crore/₹100 crore framework until the amendment is enacted and brought into force.
📜 What Is a Small Company?
Section 2(85) of the Companies Act, 2013 defines a small company by reference to its paid-up share capital and turnover, subject to prescribed limits and statutory exclusions.
Under the current framework, the prescribed limits are ₹10 crore for paid-up share capital and ₹100 crore for turnover. The 2026 Bill proposes to increase the corresponding statutory ceilings to ₹20 crore and ₹200 crore.
The classification is relevant because the Companies Act provides certain compliance relaxations to small companies.
However, financial limits are not the only condition.
The Act excludes certain entities from the definition of small company, including holding companies, subsidiary companies, Section 8 companies and companies or bodies corporate governed by a special Act, irrespective of whether their capital and turnover fall within the financial limits.
Therefore, simply having paid-up capital below ₹20 crore will not automatically make every company a small company if the proposed amendment becomes law.
📈 What Is the Proposed Change Under the 2026 Bill?
The Corporate Laws (Amendment) Bill, 2026 proposes to amend Section 2(85) of the Companies Act.
The proposal would increase the upper statutory limit for paid-up share capital from ₹10 crore to ₹20 crore.
At the same time, the upper statutory limit for turnover would increase from ₹100 crore to ₹200 crore.
This means that a larger number of private companies could potentially qualify as small companies once the amended framework becomes effective.
For example, consider a private company having paid-up capital of ₹15 crore and turnover of ₹80 crore.
Under the current ₹10 crore paid-up capital limit, it would not qualify as a small company solely because its paid-up capital exceeds the prescribed ceiling.
If the proposed amendment becomes effective with the proposed limits and the company satisfies all other conditions, the same company could potentially fall within the small-company framework.
💡 Why Is the Government Proposing This Change?
The broader objective of the Corporate Laws (Amendment) Bill, 2026 is to reduce unnecessary compliance burden and facilitate ease of doing business.
The Bill proposes several changes to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008, including decriminalisation of certain procedural defaults, simplified corporate procedures and additional relaxations for small companies.
Increasing the small-company threshold can allow growing businesses to remain within a simplified compliance framework for longer.
This is particularly relevant for startups, family-owned businesses and other privately held enterprises that may have substantial paid-up capital or turnover but do not have the same complexity as large listed or widely held companies.
🧾 What Are the Practical Benefits of Small Company Status?
Small-company status is important because the Companies Act provides various compliance relaxations to qualifying entities.
For example, small companies are currently subject to a different Board-meeting framework under Section 173(5), subject to the conditions prescribed by law.
They also benefit from specified relaxations relating to financial reporting, annual returns and certain other corporate compliances.
The Companies Act also provides a reduced penalty framework for certain defaults involving small companies and One Person Companies under Section 446B, subject to the statutory conditions.
The 2026 Bill’s Statement of Objects and Reasons specifically describes further proposed relaxations for small companies, including exemption from mandatory CSR for prescribed companies, possible relaxation concerning auditor appointment for prescribed classes and reduction in additional fees.
The exact benefit available to a company will therefore depend on the particular provision and whether the company satisfies all conditions.
🏦 Example: Company With ₹15 Crore Capital
Consider a private limited company with paid-up share capital of ₹15 crore and annual turnover of ₹75 crore.
Under the current framework, the ₹15 crore capital exceeds the current ₹10 crore prescribed limit.
Therefore, the company cannot presently claim small-company status merely because its turnover is below ₹100 crore.
If the Bill becomes law in the proposed form and the revised limits become applicable, the company could potentially qualify because its capital is below ₹20 crore and turnover is below ₹200 crore, provided it also satisfies the other statutory conditions.
This could potentially bring the company within various small-company compliance relaxations.
The proposed change is therefore particularly relevant for growing private companies that have crossed today’s ₹10 crore capital or ₹100 crore turnover limits but remain relatively smaller in overall corporate structure.
🚨 Is the ₹20 Crore Limit Already Applicable?
No.
This is the most important caution for companies and professionals working on current ROC compliance.
The Corporate Laws (Amendment) Bill, 2026 is a Bill, not yet an enacted amendment in force.
The official Lok Sabha version itself states that the proposed Act would come into force on a date notified by the Central Government, and different provisions may be brought into force on different dates.
The Bill is also undergoing parliamentary scrutiny through the Joint Parliamentary Committee. The committee’s records show clause-by-clause examination and stakeholder consultations during 2026.
Therefore, companies should not presently change their compliance classification merely because the Bill proposes ₹20 crore and ₹200 crore limits.
🔍 Current Threshold vs Proposed Threshold
At present, the prescribed small-company thresholds are ₹10 crore paid-up share capital and ₹100 crore turnover.
The Bill proposes to increase the statutory upper limits to ₹20 crore paid-up share capital and ₹200 crore turnover.
This distinction is extremely important.
The Bill’s wording would increase the maximum amount that can be prescribed under Section 2(85). It should not be understood as meaning that every company automatically becomes a small company on the date the Bill is introduced.
The final legal position will depend on the Bill’s passage, the final text after parliamentary consideration and the notification or rules required to bring the relevant provision into operation.
🏭 Impact on Growing Private Companies
The proposed change could be particularly useful for private companies that are expanding rapidly.
A company may raise significant equity capital from founders, investors or strategic investors. Its paid-up capital can therefore increase even while its business operations remain relatively straightforward.
Similarly, a growing business may cross ₹100 crore turnover without becoming a large corporate organisation in terms of employees, shareholders or operational complexity.
Under the proposed framework, more such companies could potentially remain within the small-company category.
This could reduce the compliance burden associated with certain corporate requirements and allow management to focus more resources on business growth.
🚀 Impact on Startups and MSME-Focused Businesses
For startups and MSME-focused businesses, the proposal could be particularly relevant.
A successful startup may receive multiple rounds of equity funding, increasing its paid-up share capital.
At the same time, its turnover may increase rapidly as the business expands into new markets.
Under the proposed ₹20 crore capital and ₹200 crore turnover thresholds, some growing private companies that would fall outside the current small-company limits could potentially receive the benefits available to small companies.
However, startups should not restructure their share capital solely to obtain or retain small-company status without considering the broader legal, commercial and investor implications.
🧮 Capital and Turnover Both Matter
Another important point is that the proposed limits should not be viewed independently.
The small-company definition involves both paid-up share capital and turnover, along with statutory exclusions.
A company with ₹5 crore paid-up capital but ₹250 crore turnover would not satisfy a proposed ₹200 crore turnover ceiling.
Similarly, a company with ₹25 crore paid-up capital and ₹50 crore turnover would exceed the proposed capital ceiling.
Therefore, both financial parameters should be monitored.
Companies should also understand exactly how “turnover” is determined under the applicable Companies Act provisions and rules rather than simply relying on a number taken from management accounts.
⚠️ Holding and Subsidiary Companies Need Special Attention
A common misconception is that any private company within the financial limits can become a small company.
That is incorrect.
The statutory exclusions are equally important.
For example, a subsidiary company does not qualify as a small company merely because its paid-up capital and turnover are below the prescribed limits.
The same principle applies to a holding company and other entities specifically excluded under Section 2(85).
Therefore, before applying the proposed threshold, companies should first determine whether they fall within any exclusion.
📋 What Should Companies Do Now?
Companies should not immediately alter their existing compliance procedures based solely on the proposed amendment.
Instead, they should monitor the legislative process and evaluate how the proposed changes could affect their future compliance position.
A company currently having ₹12 crore paid-up capital, for example, should continue to assess itself under the current applicable framework.
At the same time, the finance and compliance team can prepare an internal analysis showing whether the company would qualify if the proposed ₹20 crore/₹200 crore framework becomes effective.
This can be useful for future planning.
🔄 What Could Change After Enactment?
If the proposal is enacted and brought into force substantially as drafted, more companies could potentially qualify as small companies.
This could have a knock-on effect on several compliance areas because small-company status is referenced by different provisions of the Companies Act and related rules.
However, the exact practical impact should be evaluated provision by provision.
A company should not assume that becoming a small company automatically eliminates every ROC or corporate compliance.
Small companies remain companies incorporated under the Companies Act and continue to have statutory obligations.
The proposed amendment would provide relaxations, not complete exemption from corporate law.
📌 A Key Point for ROC Professionals and Founders
For professionals handling ROC compliance, the proposed amendment means that company classification will become an important review point once the legislation is finalised.
For founders, it means that a company approaching the current ₹10 crore capital or ₹100 crore turnover threshold may potentially have a different compliance profile in the future if the proposed amendment becomes effective.
But until that happens, current law and applicable rules remain the basis for compliance.
The Bill itself is therefore best understood as a proposed reform, not as a current exemption.
📝 Conclusion
The Corporate Laws (Amendment) Bill, 2026 proposes a major expansion of the small-company framework.
The proposed change would increase the statutory upper limit for paid-up share capital from ₹10 crore to ₹20 crore and the turnover ceiling from ₹100 crore to ₹200 crore.
If implemented, the change could bring a larger number of private companies within the small-company framework and potentially provide them with various compliance relaxations.
However, the proposed limits are not yet the current operative limits. The Bill remains subject to the legislative process, including parliamentary consideration, and the relevant provisions will require commencement in accordance with the final law.
Companies should therefore avoid treating the ₹20 crore/₹200 crore limits as effective for present ROC compliance.
For now, use the current applicable limits for compliance. Keep the proposed ₹20 crore capital and ₹200 crore turnover thresholds on your compliance radar for future planning.
“This article is for general information only and does not constitute legal, tax or financial advice. Please consult a qualified professional for guidance based on your specific circumstances.”