State with reasons whether the following companies can be treated as Small Companies with reference to the provisions of the Companies Act, 2013: 1.…

CA Foundation · Business Laws · MTP · January 2026
State with reasons whether the following companies can be treated as Small Companies with reference to the provisions of the Companies Act, 2013: 1. STS Pvt. Ltd., having a turnover of 10 crores and the paid-up capital of 1 crore (1,00,000 equity shares of 100 each). Out of these 60,000 equity shares are held by UV Infratech Pvt. Ltd. 2. ZX Ltd., having a paid-up capital of 3 crores and turnover of 35 crores.

Suggested Answer and Working Notes:

True: As per Section 2 (85) of the Companies Act, 2013, a 'small company' means a company, other than a public company, having paid-up share capital and turnover not exceeding prescribed limits. However, the definition specifically excludes a holding company or a subsidiary company from being classified as a small company. In the given case, STS Pvt. Ltd. is a subsidiary company of UV Infratech Pvt. Ltd. (as UV Infratech Pvt. Ltd. holds - 60,00,000 equity share capital of STS Pvt. Ltd.). Therefore, even though STS Pvt. Ltd. meets the criteria for paid-up share capital (1crore) and turnover (10crores) for a small company, it cannot be considered a small company because it is a subsidiary. Hence, the statement is true.

Topics: The Companies Act, 2013

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