AUDIT RELIEF FOR SMALL COMPANIES PROPOSED: WHAT BUSINESSES SHOULD KNOW?

 AUDIT RELIEF FOR SMALL COMPANIES PROPOSED: WHAT BUSINESSES SHOULD KNOW?

AUDIT EXEMPTIONS FOR SMALL COMPANIES

MCA plans audit exemptions for small companies via Companies Amendment Bill 2026, tied to expanded small company definition, experts seek strict thresholds and safeguards.

This could reduce compliance burdens for smaller businesses, though its final impact will depend on how eligibility is defined.

NEW SECTION 139(12) IN THE COMPANIES ACT, 2013

The Bill proposes inserting a new Section 139(12) in the Companies Act, 2013, enabling the government to exempt specific classes of companies from the requirement to appoint statutory auditors.

SMALL COMPANY

The proposal comes alongside a plan to expand the definition of “small company” by raising the paid-up capital limit from ₹10 crore to ₹20 crore and turnover from ₹100 crore to ₹200 crore.

This could widen the pool of companies eligible for simplified compliance.

ADVANTAGES

Exempting smaller companies from mandatory audits could offer multiple benefits:

ü Reduction in compliance costs

ü Lower administrative burden

ü Alignment with existing relaxations available to small companies, such as exemptions from preparing cash flow statements

ü Need for clear eligibility criteria

EXEMPTION APPLY ONLY TO UNLISTED PRIVATE LIMITED COMPANIES

“The exemption should apply only to unlisted private limited companies meeting specified thresholds, companies with listed debt, public deposits, or those operating in regulated sectors may need to be excluded.

GUARDRAILS TO LIMIT MISUSE

Among the conditions that could be considered, experts point to:

ü Restricting eligibility to companies without public deposits

ü Excluding entities in sectors such as banking, insurance, NBFCs or those under market regulation

ü Linking eligibility to demonstrable business activity, such as GST filings or employee-related contributions

ü Factoring in past compliance history

ü Alternative oversight mechanisms

KEY TAKEAWAYS

Experts suggest that such Companies could be required to submit self-certified financial statements signed by a director and a qualified accountant, with regulatory authorities retaining the power to review and withdraw exemptions if needed.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,