07-07-2021 | 12:54 PM
Small and Medium companies (SMC)
Context: The Ministry of corporate affairs (MCA) has expanded the definition of small and medium sized companies (SMCs).
Key Highlights:
• As per expanded definition, Small & Medium Companies is an unlisted company, a bank, an insurance or a financial institution with sales up to Rs 250 crore and borrowings up to Rs 50 crore.
• Earlier limit for sales was Rs 50 crore and for borrowings was Rs 10 crore.
• Now, SMCs are permitted to avail a number of exemptions under Company (Accounting Standards) Rules 2021. It will reduce complexity of regulatory filings for smaller firms.
Exemptions available to SMCs
• They are completely exempted from filing cash flow statements and providing segmental break up of their financial performance.
• They can avail partial reporting exemptions in areas like reporting on employee benefits obligations. For instance, on pensions.
• They are exempted from providing detailed analysis of benefit obligations to employees.
• They are also exempted from reporting diluted earnings per share in their filings.
About Small and medium-sized enterprises (SMEs)
• SMEs are businesses whose personnel numbers are kept below certain limits. SMEs sometimes outnumber big companies by a wide margin and employ more people.
• SMEs are also responsible for driving innovation and competition across different sectors.
NOTE:
• Banks, insurance companies, financial institutions, and listed companies cannot be classified as SMCs.
• Any holding company or subsidiary of a company which is not an SMC cannot be classified as SMC.
