Government Proposes Doubling Small Company Paid-Up Capital Limit To Rs 20 Crore

New Delhi, Jul 28 (KNN) The government has proposed increasing the statutory ceiling for paid-up share capital under the definition of a ‘small company’ from Rs 10 crore to Rs 20 crore through the Corporate Laws (Amendment) Bill, 2026, to provide greater flexibility in line with business growth and economic expansion.

Replying to a question in the Lok Sabha, Finance and Corporate Affairs Minister Nirmala Sitharaman said the existing Rs 10 crore threshold has already reached the current statutory ceiling, necessitating the amendment to enable future revisions based on the scale and nature of businesses.

Decriminalisation Measures Aim to Improve Ease of Doing Business

The minister said the government has also undertaken phased decriminalisation of technical and procedural violations under the Companies Act, 2013 and the Limited Liability Partnership (LLP) Act to improve ease of doing business.

Since 2019, 51 compoundable offences under the Companies Act have been decriminalised, with many shifted to an in-house adjudication mechanism. 

Additionally, imprisonment provisions were removed for 11 compoundable offences, while 12 offences under the LLP Act were decriminalised through the LLP (Amendment) Act, 2021.

According to the government, these reforms have reduced litigation, strengthened corporate governance and encouraged compliance while ensuring strict action against serious violations.

Fast-Track Merger Framework Expanded

The government has also expanded the scope of the fast-track merger (FTM) framework under Section 233 of the Companies Act to facilitate quicker and more cost-effective corporate restructuring.

Initially limited to mergers involving small companies and holding companies with wholly owned subsidiaries, the framework was extended in 2021 to include mergers involving startups.

In 2024, cross-border reverse flipping was permitted, allowing a foreign holding company to merge with its wholly owned Indian subsidiary under the fast-track route.

Broader Eligibility to Support Corporate Restructuring

The eligibility criteria were further widened in 2025 to cover mergers between unlisted companies, excluding Section 8 companies, provided each company's aggregate outstanding borrowings do not exceed Rs 200 crore.

The revised framework also enables intra-group restructuring between holding companies and subsidiaries as well as among fellow subsidiaries, with deemed approval provisions ensuring mergers are cleared within a 60-day timeline.

(KNN Bureau)