A company may have low paid-up capital and turnover but still fail to qualify as a small company under the Companies Act, 2013. One important reason is the statutory exclusion for holding and subsidiary companies.
Section 2(85) excludes a holding company or subsidiary company from the small-company definition. Therefore, satisfying the revised financial limits alone does not establish eligibility.
Consider a private limited company with paid-up share capital of ₹2 crore and turnover of ₹15 crore. Those figures fall within the revised financial ceilings introduced from 1 December 2025.
However, if the company is a subsidiary of another company, it falls within a category excluded by Section 2(85). It should not select MGT-7A based only on the financial figures.
The same issue can arise for a holding company whose own operations are small. Its legal relationship with another company must be considered.
Section 2(85) also excludes:
Public companies are outside the definition as well.
Review the company’s incorporation records, ownership structure, MCA master data and relevant group relationships. If the company has acquired another business, undergone a restructuring or changed its ownership structure, confirm whether those facts affect the classification.
Do not assume that a company qualifies because it has a small workforce, limited revenue or no external investors. These facts do not override the statutory exclusions.
Confirm the company type, financial thresholds and exclusions for the relevant filing. If the ownership relationship is complex, obtain professional advice before selecting the annual-return form.
Key takeaway: The small-company test is not only a financial test. Holding-company and subsidiary status can prevent a company from qualifying even when its figures are below both limits.
Indian companies must complete their annual compliance requirements even when business activity is limited or the company has not generated revenue. However, the type of annual return a company files can depend on its legal classification. A significant change took effect on 1 December 2025: the Ministry of Corporate Affairs …
