The New Companies Bill for SMEs

With the Indian SME becoming the backbone of the emerging Indian economy and the growing Indian stature globally, there are structures to be created which facilitate growth for the SMEs towards their emergence as large sectoral players.

Source: http://www.thehindubusinessline.com/2010/07/14/images/2010071453431901.jpg

While we at IndiaMart have been constantly sharing with our SME partners on their views on the subject, many of them have responded back with the thought of a new set of directives to be proposed by the Governments which allows softer norms for SMEs to comply with, which create a holistic environment of growth and spur innovation and collaboration.

We realize that many a times SMEs in India face issues due to lack of information and hence this Knowledge Forum for the Indian SMEs (IndiaMartb2b.blogspot.com) aims at empowering the Indian SME with knowledge and helping them grow! This post dwells upon the companies bill passed for the SMEs in India which at least a step is motivating for the SMEs and we welcome the same.

What is the New Companies Bill and what does it mean for the SMEs?
A small company shall be defined as a company which satisfies three conditions:

• It should not have a paid-up share capital and a turn-over beyond a specified limit
• The company should not be regulated by any sectoral regulator
• It should not hold any subsidiary company

There has been talk all around as to how to create a holistic growth oriented environment for SMEs in India and how to increase their say in the growing corporate business environment?! Many suggestions have since come up and thought leaders have proposed plans.

We all realize the power of the ever growing SME segment in India. Its slowly becoming the backbone of true innovation and growth of the emerging Indian economy globally. For this growth momentum to gain speed and to sustain while creating and delivering value over the longer horizon, the government has to be involved actively and participate in creating and coming up with rules and regulations, which help the SMEs grow.

What is the proposed Bill like: in simple words!

At IndiaMart, our core focus has always been to make things easier and simpler for our partner SMEs and hence we explain the New Companies Bill in its entirety while maintaining simplicity:

• A company should not have a paid-up share capital and a turnover beyond a specified limit. According to MSME Development Act, 2006, a small enterprise is one having an investment of more than 25 Lakh Indian Rupees but less than 5 crore Indian Rupees, if it is dealing in the production of goods whereas if the enterprise is dealing in the rendering of services then the investment in equipment should be more than 10 Lakh Indian rupees but should not exceed the limit of two crore.
• The new bill also clearly states that a company is not to be regulated by any sectoral regulator, for it to gain a recognized status of an SME, this clearly implies that the companies which are governed by a sectoral regulator cannot be classified as SMEs. 

Example: Telecom companies, governed by (TRAI) do not classify under the provision for the small companies in the new Companies Bill

MSME Doing its bit towards Growth of the SME in India

MSME in India has been working to lower many burdening mechanisms which have been existing which make it difficult for a small and emerging company to grow faster. Apart from infrastructure being created and managed, there are new laws being set which relax the requirements for Small and Medium enterprises and help them flourish, towards becoming large working corporate.

• The new bill also mandates that the enterprise that is having other subsidiaries to it, cannot be classified as a small company and hence will not be able to enjoy the privilege of certain exemptions which are validated for SME's.

Its time that SMEs be recognized

Many of our partner SMEs have since time raised the concern that Small and Medium companies need to be recognized and there have to be a different set of levels of compliance for SME's. There have to be new set of expectations to be created for the SMEs which have to be regulated under a formal bill which allow the SMEs to practically explore new and emerging opportunities towards growth.

The new bill proposes to exempt small companies from certain provisions of the company’s act. Those exemptions will be notified by the central government separately.

We are sure, as emerging SMEs you will sure have pointers to raise and concerns to share which can help many fellow SMEs towards mutual growth. Drop in your comments to the post and we shall take steps that your voice be heard!