Expansion of higher thresholds of Small and Medium Companies

In a latest development, the Ministry of Corporate Affairs has expanded the definition of small and medium companies (SMC), raising their turnover and borrowing limits.

Context

In a latest development, the Ministry of Corporate Affairs has expanded the definition of small and medium companies (SMC), raising their turnover and borrowing limits.

What is an SMCs (the new definition)?

According to the new definition, an SMC is unlisted company, which is not bank, financial institution or insurance firm whose-

• equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India.
• Turnover: The turnover threshold for SMCs has been increased to Rs 250 crore from Rs 50 crore.
• Borrowing: The borrowing threshold has increased to Rs 50 crore from Rs 10 crore.
• SMCs are permitted to avail several exemptions under the Company (Accounting Standards) Rules 2021 to reduce the complexity of regulatory filings for smaller firms.
  

Who cannot be classified as an SMC?

• Banks, financial institutions, insurance companies, and listed companies cannot be classified as SMCs.
• Any company which is either the holding company or subsidiary of a company that is not an SMC cannot be classified as an SMC.