1. paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; or
2. turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees.
Provided that nothing in this clause shall apply to –
1. a holding company or subsidiary company;
2. a company registered under section 8; or
3. a company or body corporate governed by any special Act

1. The first issue is whether for being a small company, the company should be below threshold limit in both sub-clauses i.e. share-capital and turnover or it will be non-small company till it does not cross both the limits. This question is being raised because of use of word 'or' between sub-clause (i) and (ii) which makes one to interpret that it will be small company till both the limits are not crossed.
2. If one read the provisions carefully, one would reach to the conclusion that it will be small company only if the company does not cross the limits given in both the sub-clauses. Both sub-clauses are in negative, and therefore, 'or' becomes 'and'.
3. Secondly, if we do purposive construction, we will find that it provides for two criteria one based on paid up capital and other based on turnover. So, if a company exceeds the limit for paid-up capital, though it may not have any turnover during the year, it will not be a small company. Similarly, a company may have small capital but may be having turnover exceeding the limit given, it will also not be a small company. A support may be taken from Companies (Accounting Standard) Rules which defines Small and Medium Sized Company. There also 5 conditions have been given and they all are mutually exclusive and have to be independently tested.
4. The courts have also held that 'the word 'or' is normally disjunctive and 'and' is normally conjunctive but at times they are read as vice versa to give effect to the manifest intention of the Legislature as disclosed from the context.
5. The Institute of Company Secretaries of India has also brought out FAQ on the Companies Act, 2013 and has given the same view.

1. Public Company – specifically excluded in the main part of the definition. It will include subsidiary of a company, not being a private company.
2. A holding or a subsidiary company: A question arises whether a private limited company which is a holding company of another private limited company and its capital and turnover are within the prescribed limit, will it be a 'small company'? The answer is in negative. A company will be out of definition of 'small company' if it is either a holding company or a subsidiary of another company, even if such other company is not a public company. In accounting standard rules, only those holding and subsidiary companies are excluded which are holding or subsidiaries of non small and medium sized company. However, in the Companies Act, 2013, proviso excludes all holding and subsidiary companies from the definition of 'small company'. If a company becomes either holding company or subsidiary company, it cannot claim to be 'small company'.
3. A company registered under Section 8 : This section relates to companies formed with charitable objects and are given license by the Central Government. Such companies will also not be 'small company'.
4. A Company or Body corporate governed by any Special Act. Banking Companies, Electricity Companies, Insurance companies, NBFC etc. will not be 'small company'.

1. Annual Return (Section 92)
   In case of small company, annual return is to be signed by the company secretary and where there is no company secretary, it may be signed by the director of the company. In case of non-small company, annual return is to be signed by a director and the company secretary or where there is no company secretary, by a company secretary in practice.
2. Meetings of Board (Section 173)
   A small company is permitted to have one meeting in each half of the calendar year and the gap between two meetings is not less than 90 days. Other companies are required to hold four meetings of the board in each year in such a manner that gap between two meeting is not more than one hundred twenty days.
3. Amalgamation (Section 233)
   Special provisions has been made in the Act for merger of two or more small companies or between a holding company and its wholly owned subsidiary company or such other class or classes of companies as may be prescribed. This provides for liberal methodology for amalgamation without going to the Tribunal, if the Registrar and the Official Liquidator has no objection or suggestions to the scheme. In such a case, the Central Government shall register the scheme and issue a confirmation thereof.
4. Cash Flow Statement (Section 2(40))
   Small company is not required to prepare Cash Flow Statement.
5. Fees for Small Companies
   There is substantial rebate in fees for registration of small companies. It is also provided that such fees will be applicable only if it remains small for a minimum period of one year from the date of its incorporation.

Next question which arises is as to the date on which the status of company is to be determined.

Turnover criterion is to be tested based on last profit and loss account. The next question is which is 'last'. Whether it is of last year or any other profit and loss account prepared for any purpose. In my view, it will be of last previous year because it is the profit and loss account which has got legal sanctity under the law. Hence, even if the turnover exceeds the limit, it will continue to be 'small' during the year but will cease to be so in the next year. Since now, annual return is to be as on the last day of the financial year, in my view, the turnover will be required to be seen of the immediately previous year.

The second criterion of paid-up capital is to be seen on each occasion when the exemption or privilege of being small is claimed. In case of increase in share capital, it will cease to be small, as soon as the shares are allotted. In case of buy-back or reduction of share capital, it will be entitled to claim the status of 'small' as soon as the process of buy-back is complete.