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Small Company Definition Under Section 2(85)

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Documents: Section 2(85) classification opinion letter and self-check decision-table covering both thresholds and four exclusions

Fees: One-time classification opinion from Rs 4,500; annual retainer with MGT-7A benefits from Rs 12,000

Eligibility: Paid-up share capital up to Rs 10 crore AND turnover up to Rs 100 crore (G.S.R. 880(E) dated 1 December 2025)

Timeline: Written classification opinion in 2 working days; live self-check decision tree on this page

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Overview What Is It Self-Check What We Deliver Process Documents Challenges Fees Timeline Why Patron Comparison FAQs

Section 2(85) Classification at a Glance

📌 TL;DR - Small Company Definition - Section 2(85) Services at a Glance

A small company under Section 2(85) is a private company with paid-up share capital up to Rs 10 crore AND turnover up to Rs 100 crore (G.S.R. 880(E) dated 1 December 2025). Holding, subsidiary, Section 8, and special-Act companies are excluded - regardless of size.

Most promoter-led private limited companies qualify as small companies, but the classification check has nuance. Both thresholds must be satisfied simultaneously, the exclusions are absolute, and status is re-tested every financial year against the immediately preceding year audited figures. A wrong call costs MGT-7A simplification, halved penalties under Section 446B, and the simpler board-meeting regime.

Quick-Reference Summary:

Parameter	Detail
Governing Provision	Section 2(85) Companies Act 2013, Rule 2(1)(t) Companies (Specification of Definition Details) Rules 2014
Current Thresholds	Paid-up capital up to Rs 10 crore AND turnover up to Rs 100 crore
Effective From	1 December 2025 (MCA G.S.R. 880(E))
Excluded	Public, holding, subsidiary, Section 8, special-Act companies
Key Benefit	MGT-7A instead of MGT-7; 2 board meetings instead of 4; Section 446B half-penalty
Classification Fee	Patron Section 2(85) opinion - Rs 4,500 one-time
Authority	Ministry of Corporate Affairs (MCA), Registrar of Companies (ROC)

Fees are indicative starting prices for standard scope. Final fee depends on complexity, holding-subsidiary chain, and turnaround. Government valuation, ROC filing, and any MCA enquiry response are billed at actuals.

Content is reviewed quarterly for accuracy.

What Is a Small Company Under Section 2(85)?

A small company under Section 2(85) of the Companies Act 2013 is a private company whose paid-up share capital does not exceed Rs 10 crore and whose turnover, as per the profit and loss account for the immediately preceding financial year, does not exceed Rs 100 crore.

Both conditions must be met simultaneously. The thresholds were revised by MCA notification G.S.R. 880(E) dated 1 December 2025, which amended Rule 2(1)(t) of the Companies (Specification of Definition Details) Rules 2014. The earlier limits were Rs 4 crore paid-up capital and Rs 40 crore turnover.

The proviso to Section 2(85) absolutely excludes four categories from small-company status regardless of size: public companies, holding companies, subsidiary companies, Section 8 (non-profit) companies, and any company governed by a special Act.

Key Terms for Small Company Definition - Section 2(85):

Paid-up share capital

Amount of capital actually paid by shareholders against allotted shares, as on the last day of the financial year - not authorised capital, not subscribed capital.

Turnover

Aggregate revenue from operations per the profit and loss account of the immediately preceding financial year (Section 2(91)).

Holding company

A company controlling another via majority shareholding or board control under Section 2(46). Excluded from small-company status by proviso to Section 2(85).

Subsidiary company

A company controlled by another company under Section 2(87). Excluded from small-company status, even if its own paid-up capital and turnover are below the thresholds.

From Rs 4,500 one-time

Self-Check: Is Your Company a Small Company?

Section 2(85) classification check applies to every private limited company filing AOC-4 and the annual return - status determines whether MGT-7 (regular) or MGT-7A (simplified) is filed.

Who needs this check

Private limited companies preparing to file annual returns and deciding between MGT-7 and MGT-7A
Promoter-led companies whose paid-up capital crossed Rs 4 crore or turnover crossed Rs 40 crore in FY 2024-25 but stayed under the new Rs 10 crore and Rs 100 crore ceilings
Group companies checking whether becoming a subsidiary of another company knocks out small-company status
Companies that previously filed MGT-7 XBRL and want to test whether the new thresholds permit a switch to MGT-7A
Section 8 (non-profit) companies and special-Act companies seeking written confirmation that they remain excluded under the proviso

Re-testing rule: Small-company status is re-assessed every financial year against the immediately preceding year audited financials. Status can flip year to year.

Self-Check Decision Table

Walk this table top to bottom. Stop at the first row that returns NO - the company is not a small company.

Step	Question	Pass = continue \| Fail = stop
1	Is the company a private limited company?	If public - NOT a small company. Stop.
2	Is it a holding company under Section 2(46)?	If yes - NOT a small company (proviso). Stop.
3	Is it a subsidiary under Section 2(87)?	If yes - NOT a small company (proviso). Stop.
4	Is it registered under Section 8 (non-profit)?	If yes - NOT a small company (proviso). Stop.
5	Is it governed by any special Act (NBFC, bank, etc.)?	If yes - NOT a small company (proviso). Stop.
6	Is paid-up share capital on 31 March of previous FY up to Rs 10 crore?	If above Rs 10 crore - NOT a small company. Stop.
7	Is turnover per previous-year profit and loss account up to Rs 100 crore?	If above Rs 100 crore - NOT a small company. Stop.
8	All 7 steps passed?	Yes - QUALIFIES as a small company for the current FY.

For a written opinion that names the company, cites the audited figures, and confirms which form set applies, call +91 945 945 6700 or request a Section 2(85) Classification Opinion.

What Patron Delivers

Service	What We Do
Section 2(85) Classification Opinion	Written CA-and-CS opinion confirming small-company status (or absence) for the current FY against the previous year audited figures, with citations to Rule 2(1)(t) and G.S.R. 880(E).
Self-Check Decision Tree	Embedded decision table covering both thresholds and four exclusion categories - users can self-test before requesting a paid opinion.
MGT-7 vs MGT-7A Filing Path Mapping	Selection of correct annual return form, signatory rules (single director for MGT-7A), and ROC fee implication.
Benefit Activation	Implementation of small-company exemptions: 2 board meetings under Section 173(5), Section 446B half-penalty positioning, abridged directors report, no cash flow statement.
Status-Change Watch	Annual reassessment as soon as audit is signed; flagging where paid-up capital, turnover, holding-acquisition, or Section 8 conversion has moved the company out of small-company status.
Edge-Case Resolution	Treatment of recently restructured groups, deemed-public companies, IFSC private companies, and merger-driven turnover spikes that distort the preceding-year test.

Our Process

How Patron Issues a Section 2(85) Classification Opinion

Patron runs every Section 2(85) classification opinion through 5 steps under Rule 2(1)(t) and the Section 2(85) proviso.

MCA Master Pull and Status Confirmation

Pull the company master from MCA portal and confirm Companies Act 2013 status, CIN, and current category (Pvt / Public / OPC / Sec 8). This sets the eligibility envelope before any threshold test is run.

MCA Master Data

Paid-up Capital Inspection

Inspect the latest audited balance sheet for paid-up share capital as on 31 March of the preceding financial year. We use authorised capital, subscribed capital, and called-up vs paid-up reconciliations to land on the right figure.

Balance Sheet Read

Turnover Inspection (Schedule III, Division I)

Inspect the latest profit and loss account for turnover (revenue from operations under Schedule III, Division I). Other-income lines, non-operating gains, and exceptional items are kept out of the Section 2(85) turnover figure.

Revenue from Operations

Proviso Exclusion Check

Run exclusion check against the Section 2(85) proviso - holding under Section 2(46), subsidiary under Section 2(87), Section 8 status, and any special-Act applicability. Beneficial ownership through layered structures is tested, not just the immediate cap-table view.

Proviso Test

Written Classification Opinion

Issue written classification opinion with citations to Rule 2(1)(t), G.S.R. 880(E) dated 1 December 2025, and Section 446B benefits where status is confirmed. Partner-CA signed; ready to share with auditor, ROC, or lender.

Opinion Letter

Documents Required

Certificate of Incorporation

Plus current MCA master data print showing CIN, category, and registered office.

Latest Audited Balance Sheet

Showing paid-up share capital as on 31 March of preceding FY.

Latest Profit and Loss Account

Showing revenue from operations under Schedule III, Division I.

Shareholding Pattern

As on 31 March of the previous FY - for cap-table and beneficial-ownership testing.

MOA and AOA

To check Section 8 status, special-Act clauses, and authorised-capital cap.

Holding-Subsidiary Statement

If part of a group - lists every parent, sister, and downstream entity.

Common Challenges and Patron Solutions

Challenge	Impact	How Patron Accounting Solves It
Companies that crossed old thresholds (Rs 4 cr / Rs 40 cr) but stay under new ones (Rs 10 cr / Rs 100 cr) are unsure if they now requalify	Patron applies the amended Rule 2(1)(t) thresholds against the preceding-year audited figures and issues a written requalification opinion. Companies that filed AOC-4 XBRL in any prior year may still be required to file XBRL going forward - flagged separately.
Holding-subsidiary status accidentally triggered by intra-group share acquisitions	Patron tests Section 2(46) and Section 2(87) control criteria including beneficial ownership through layered structures, not just the immediate cap-table view.
Turnover spike from a one-off transaction in the preceding year pushing the company above Rs 100 crore	Status is fact-based on the preceding-year P&L. Patron documents the test, signals that small-company status returns automatically once turnover normalises, and maps the interim MGT-7 obligation.
IFSC private companies and deemed-public companies under the Section 2(71) proviso require special treatment	Patron uses the IFSC G.S.R. 09(E) dated 4 January 2017 exemption notification carve-outs and the deemed-public proviso to issue a defensible classification.

Patron Fees for Section 2(85) Work

Fee Component	Amount
Section 2(85) Classification Opinion	Written CA-CS opinion, both threshold tests, exclusion checks, citations	Rs 4,500 one-time
Annual Retainer with Small-Co Benefits	MGT-7A, AOC-4, ADT-1, DIR-3 KYC, 2 board meetings, Section 446B positioning	Rs 12,000 per year
Status-Change Watch (annual add-on)	Quarterly check on holding-acquisition, paid-up movement, turnover trajectory	Rs 3,000 per year
Group Reclassification Project	Multi-entity Section 2(46) / 2(87) testing across holding-subsidiary chain	Quoted on scope

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

Professional service charges for drafting, filing, and representation are separate from the statutory fees. The exact fee depends on the complexity of the case, disputed amount, and number of hearings required. Contact us for a detailed quote.

Get a free Small Company Definition - Section 2(85) consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

Turnaround Timeline

Stage	Estimated Timeline
Self-check decision table	Instant, on this page
Written Section 2(85) classification opinion	2 working days from document handover
Group reclassification project	5 to 10 working days depending on number of entities and holding-subsidiary depth
MGT-7A annual return filing once classification confirmed	5 to 7 working days, well inside the 60-day Section 92 window
Status reversal documentation (small to regular)	3 working days when audited figures cross thresholds

                    
                    Patron commits to a 2-working-day SLA on the written Section 2(85) classification opinion once documents are received. Group projects with multiple holding-subsidiary entities may take longer.

Key Benefits

Why Choose Patron for Section 2(85) Classification

15+ Years Companies Act Practice

Partner CAs and CSs with 15 plus years of pure Companies Act 2013 practice - every classification opinion is partner-reviewed and cites the exact Rule, Section, and notification.

Avoid Wrong-Form Re-filing

Filing MGT-7 instead of MGT-7A when you qualify wastes work; filing MGT-7A when you do not qualify invites ROC defect notices and officer-in-default exposure. Patron settles the question in writing.

Live Self-Check Plus Paid Opinion

You can self-test using the decision table on this page before paying. The Rs 4,500 written opinion is for promoters and CFOs who need a partner-signed document on file.

Four-Office City Coverage

Offices in Pune, Mumbai, Delhi, and Gurugram. Document handover and document handback are local; the opinion is delivered nationwide.

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Small Company vs Regular Private Company

Parameter	Small Company (Sec 2(85))	Regular Private Company
Annual return form	MGT-7A (simplified)	MGT-7 (full)
Annual return signatory	Single director or CS	Director plus CS
Board meetings per year	2 (Section 173(5))	4 (Section 173(1))
Cash flow statement	Not required (proviso to Sec 2(40))	Required
Internal financial controls reporting	Auditor not required to report	Required under Section 143(3)(i)
Mandatory auditor rotation	Section 139(2) does not apply	Applies above thresholds
Late-filing penalty under Sec 92, 117, 137	Half penalty under Section 446B	Full penalty
Abridged directors report	Permitted under Section 134(3A)	Full directors report required

Connected Services

Section 2(85) classification often connects to other Patron service lines:

Annual compliance for private limited companies - full annual pack once classification is confirmed, with the right form set chosen.
Small company annual compliance bundle - fixed-fee MGT-7A, AOC-4, ADT-1, DIR-3 KYC, audit, and ITR-6 package.
Pvt and LLP compliance tracker - month-by-month tracker tuned to small-company versus regular-company filing windows.
Transfer of shares - SH-4, stamp duty, register update when shareholding changes affect classification thresholds.
Change in authorised capital - SH-7 filing, MOA amendment when paid-up capital movement is planned.
Appointment of director - DIR-12 and statutory register updates relevant to board-meeting count requirements.
Director KYC - DIR-3 KYC, triennial from FY 2026-27.

Legal and Compliance Framework

Companies Act 2013

Section 2(85) defines small company; Section 2(46) holding; Section 2(87) subsidiary; Section 2(71) public company; Section 92 annual return; Section 137 financial-statement filing; Section 173 board meetings; Section 446B half-penalty for small companies on defaults under Sections 92, 117, and 137.

Companies (Specification of Definition Details) Rules 2014

Rule 2(1)(t), amended by G.S.R. 880(E) dated 1 December 2025 (Official Gazette of India), fixes small-company thresholds at Rs 10 crore paid-up and Rs 100 crore turnover. These are the statutory ceilings under Section 2(85).

Schedule III Companies Act 2013

Division I prescribes the form of P&L; the turnover figure used for the Section 2(85) test is the Revenue from Operations line of the preceding-year audited P&L.

Penalty Exposure

Section 137 - Rs 100 per day per form, no upper cap; company penalty up to Rs 50,000; officer-in-default up to Rs 5 lakh. Section 92 carries identical Rs 100 per day per form penalty. Small companies pay half under Section 446B.

Primary sources: India Code (Companies Act 2013), Ministry of Corporate Affairs, Official Gazette.

What is the small company definition under Section 2(85)?

A small company is a private company with paid-up share capital up to Rs 10 crore AND turnover up to Rs 100 crore as per the preceding-year P&L. Both conditions must be met. Public, holding, subsidiary, Section 8, and special-Act companies are excluded.

What are the new small company thresholds in 2026?

Paid-up share capital up to Rs 10 crore and turnover up to Rs 100 crore, effective 1 December 2025 via MCA notification G.S.R. 880(E) which amended Rule 2(1)(t). The earlier thresholds were Rs 4 crore and Rs 40 crore.

Is my company a small company under the Companies Act 2013?

Use the self-check decision table above. It walks through both threshold tests and all four proviso exclusions. For a written CA-and-CS opinion citing your audited figures, request a Section 2(85) Classification Opinion from Patron at Rs 4,500.

Can a holding company be a small company?

No. The proviso to Section 2(85) excludes holding companies from small-company status, regardless of paid-up capital or turnover.

Can a Section 8 company qualify as a small company?

No. Section 8 (non-profit) companies are excluded by the proviso to Section 2(85), irrespective of size.

What is the main benefit of being a small company?

Simpler annual return on MGT-7A, two board meetings instead of four, no cash flow statement, abridged directors report, halved penalties under Section 446B for defaults on Sections 92, 117, and 137, and exemption from auditor rotation under Section 139(2).

What is the difference between MGT-7 and MGT-7A?

MGT-7 is the full annual return for all companies. MGT-7A is the simplified return available only to small companies and OPCs, can be signed by a single director, and skips disclosures around indebtedness and remuneration ratios.

How is small-company status tested every year?

Status is re-tested every financial year against the immediately preceding year audited paid-up capital (balance sheet) and turnover (profit and loss account). Status can flip year to year.

Quick Answers

Both thresholds (current): Paid-up up to Rs 10 crore AND turnover up to Rs 100 crore.
Effective date of current thresholds: 1 December 2025 via MCA G.S.R. 880(E).
Earlier thresholds (pre-Dec 2025): Rs 4 crore paid-up and Rs 40 crore turnover.
Excluded categories: Public, holding, subsidiary, Section 8, special-Act companies.
Annual return form for small companies: MGT-7A under Section 92.
Board meetings per year: Two, with minimum 90-day gap, under Section 173(5).
Penalty halving provision: Section 446B applies to defaults under Sections 92, 117, and 137.
Small company kaise check kare: Use the decision table above - both threshold rows must pass AND all four exclusion rows must fail.
Mera company small company hai ya nahi? If your private company is not a holding or subsidiary, not Section 8, not under a special Act, AND your paid-up capital and turnover stay under Rs 10 crore and Rs 100 crore - yes, it qualifies.

Confirm Section 2(85) Status Before You File

Most FY 2025-26 annual returns will be filed under the new thresholds. AOC-4 is due 30 days from AGM. MGT-7 or MGT-7A is due 60 days from AGM. Each day of delay attracts Rs 100 per day per form under Section 137 and Section 92 with no upper cap; small companies pay half under Section 446B. Confirm classification before filing - re-filing notices are expensive.

Get Your Section 2(85) Classification in 2 Working Days

The Section 2(85) classification looks simple but the proviso exclusions and the preceding-year-figures rule trip up many companies that assume their previous status carries forward. The December 2025 threshold revision has expanded the small-company pool sharply, and the savings on MGT-7A, board governance, and Section 446B half-penalty are material.

Patron Accounting brings 15 plus years of Companies Act experience to issue defensible classification opinions and to keep filings aligned with current law. Call +91 945 945 6700, WhatsApp the team, or email info@patronaccounting.com for a Rs 4,500 written opinion.

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Content Created: 12 May 2026 | Last Updated: 12 May 2026 | Next Review: 12 August 2026 | Reviewed By: CA & CS Team, Patron Accounting LLP

This page is reviewed every 3 months (Tier 1 - quarterly review for amendment-prone regulatory thresholds). Last verified against MCA G.S.R. 880(E) dated 1 December 2025.