“MORE REFORMS IS ON THE WAY WHICH WILL WORK FOR SMALL BUSINESSES: MSME REFORMS BY DECEMBER,2025”

 

“MORE REFORMS IS ON THE WAY WHICH WILL WORK FOR SMALL BUSINESSES:

MSME REFORMS BY

 DECEMBER,2025”

PMO, Finance, and MSME ministries working on cluster-to-national reform roadmap with focus on jobs, cost control, legal ease, and innovation in small business sector.

WHAT REFORMS HAVE ALREADY BEEN ANNOUNCED FOR MSME ?

Several major policy changes are already in motion:

REVISED DEFINITION

The definitions of micro, small and medium enterprises have been significantly revised, meaning more firms qualify for MSME status and its benefits (for example, higher investment/turnover thresholds).

EXPANDED SCOPE OF CREDIT-GUARANTEE SUPPORT

The government has expanded the scope of credit-guarantee support: for instance, guarantee cover for micro & small enterprises increased from ₹5 crore to ₹10 crore.

CUSTOMISED CREDIT-CARD FACILITY

Introduction of new financial instruments for MSMEs: e.g., a customized credit-card facility for micro enterprises, special term loans for first-time women, SC/ST entrepreneurs.

CHANGES IN GST THRESHOLDS

Some reform suggestions are being circulated for further legal and regulatory ease — faster dispute resolution for MSMEs, changes in GST thresholds for small businesses, etc.

WHAT’S PLANNED FOR “BY DECEMBER,2025”

A SOLE MEDIATOR/ARBITRATOR FOR MSME

Amendments to the Micro, Small & Medium Enterprises Development Act, 2006 (MSMED Act) to introduce e-adjudication and a sole mediator/arbitrator for MSME payment disputes, possibly by December.

INCREASE IN GST EXEMPTION LIMITS

Increase in GST exemption limits (for goods/services) for smaller businesses by March 2026, with intermediate steps by end of calendar year.

REDUCTION IN TAX AND COMPLIANCE BURDEN

BOOSTING PRODUCTIVITY

IMPROVED COST COMPETITIVENESS

LEVERAGING AI AND TECH INNOVATION TO STRENGTHEN MANUFACTURING

FINAL THOUGHTS

Thus, while some changes are already in effect or being rolled out, others are earmarked for later in the year (or into early the next fiscal year).

 

R V SECKAR FCS, LLB 79047 19295

THE MINISTRY OF CORPORATE AFFAIRS (MCA) IS ACTIVELY REVIEWING THE COMPANIES ACT FOR FURTHER AMENDMENTS- FURTHER EASE OF DOING BUSINESS

 THE MINISTRY OF CORPORATE AFFAIRS  (MCA)  IS ACTIVELY REVIEWING THE COMPANIES ACT FOR FURTHER AMENDMENTS- FURTHER EASE OF DOING BUSINESS 

The corporate affairs ministry (MCA) is preparing significant amendments to the companies law, aiming to ease business operations and reduce compliance burdens.  

Key changes under consideration include mandatory risk management committees, a stronger audit framework, and simplified capital raising rules, with introduction planned for the winter parliamentary session. 

PROPOSED FUTURE AMENDMENTS (UNDER DELIBERATION) 

The Ministry of Corporate Affairs is actively reviewing the Companies Act for further amendments, potentially including: 

RISK MANAGEMENT COMMITTEES:  

• Introduction of a provision for mandatory Risk Management Committees in certain companies to strengthen oversight of risk detection and resolution. 

 

ELECTRONIC COMMUNICATION & MEETINGS:  

 

Allowing companies to communicate with members in electronic form only and permitting general meetings to be held in virtual, physical, or hybrid modes. Broader recognition of technology in shareholder engagement. 

 

REPLACEMENT OF AFFIDAVITS:  

Replacing the requirement of affidavits for various purposes with simple self-declarations. 

 

DIRECTOR PROVISIONS:  

Revisiting provisions concerning the disqualification of directors and the procedure for the resignation of Key Managerial Personnel (KMP). 

 

EASE IN CAPITAL RAISING:  

 

Streamlined norms for issue of securities and private placements. 

FASTER RESTORATION OF STRUCK-OFF COMPANIES:  

Quicker revival mechanisms through digital facilitation. 

ELECTRONIC COMMUNICATION WITH SHAREHOLDERS: 

Mandatory digitization of shareholder correspondence and disclosures. 

FINAL THOUGHTS   

These reforms are aimed at aligning India's corporate governance framework with global best practices, enhancing transparency, and creating a more competitive and investment-friendly environment for businesses of all sizes, especially MSMEs and startups. 

 

R V SECKAR , FCS ,LLB 79047 19295 

CAN A COMPANY RE-CLASSIFY AMOUNTS STANDING IN THE “SECURITIES PREMIUM ACCOUNT” INTO RETAINED EARNINGS OR RESERVES AS PART OF ITS CAPITAL REDUCTION?

 CAN A COMPANY RE-CLASSIFY AMOUNTS STANDING IN THE “SECURITIES PREMIUM ACCOUNT” INTO RETAINED EARNINGS OR RESERVES AS PART OF ITS CAPITAL REDUCTION? 

NCLT KOLKATA REJECTS CAPITAL REDUCTION LINKED TO SECURITIES PREMIUM RECLASSIFICATION IN MODERN HI-RISE PVT. LTD 

Facts 

• Modern Hi-Rise Private Limited (“MHPL”) had filed a petition under Section 66 of the Companies Act, 2013 for reduction of its share capital.  

• The reduction was proposed in the context of a prior scheme of arrangement (the company had issued non-cumulative redeemable preference shares on 28 March 2019 as part of the amalgamation scheme) and the company proposed to re-classify amounts standing in the “securities premium account” into retained earnings or reserves as part of the reduction.  

• The petition sought to approve the reduction of capital (including reclassification of securities premium) by the NCLT under Section 66 and Section 52 of the Companies Act. 

KEY LEGAL PRINCIPLES 

• Under Section 52 of the Companies Act, 2013, the “securities premium account” must be used only for specific purposes (such as issuing fully paid-up bonus shares, writing off preliminary expenses, etc.). The Act does not permit arbitrarily transferring the securities premium to retained earnings. 

PERMITTED PURPOSES OF CAPITAL REDUCTION  

• The permitted purposes for capital reduction under Section 66 of the Companies Act include extinguishing or reducing liability on partly paid-up shares, cancelling paid-up capital that is lost or unrepresented by assets, and returning excess capital to shareholders.   

Company sought to transfer securities premium to retained earnings, arguing excess reserves and shareholder value creation. 

ROC AND RD (ER) OBJECTON 

• However , RoC and RD (ER) objected, stating: 
  Such reclassification is not permitted under Sections 52, 55, and 66. 
   

• NCLT lacks jurisdiction to approve reclassification of capital reserves. 

 

• Auditor’s certificate failed to flag the accounting inconsistency. 

                   JUDICIAL INSIGHT: 
 
“Securities premium is a capital receipt, not revenue in nature. Its use is restricted to specific purposes under Section 52. Reclassifying it as retained earnings violates GAAP and statutory intent.” – NCLT Kolkata,   

OUTCOME: 

• Petition dismissed by NCLT KOLKATA. 
   

• .Matter flagged for potential professional misconduct under ICAI norms against Auditor of the company 

R V SECKAR , FCS, LLB 79047 19295