06/05/2026
The periodic expansion of the definition of "small company" in company law is undoubtedly a commendable step towards Ease of Doing Business. This has relieved many entrepreneurs from compliance complications and created a more favourable business environment.
But, every generosity brings with it a responsibility. When paid-up capital and turnover limits are increased, a large number of companies fall into the category of "small company". As a result, many statutory compliances applicable to them are exempted. This exemption can also undermine the compliance culture in some places.
The Companies Act, 1956 had provided for the Compliance Certificate, which ensured discipline, transparency and accountability for small companies. In the present context, re-implementation of such an arrangement should be seriously considered in the Companies Act 2013 on the similar lines by suitable amendments. This will strengthen the sense of corporate governance even in small companies and enable them to develop a better compliance culture from the start.
The purpose of Ease of Doing Business should not be freedom from compliance, but rather to simplify compliance. Generosity and discipline—a balance between the two—is the cornerstone of a healthy corporate system.
