By ComplianceDekho.com | Corporate Law | Ease of Doing Business
Introduction: Has compliance become more complicated than running a business?
India has made significant progress in improving its business environment. Online incorporation, electronic filings, decriminalisation of procedural defaults and the introduction of centralised processing of company forms have helped modernise corporate administration.
However, for a large number of private limited companies, startups, family-owned businesses, professional firms and MSMEs, the cost of maintaining a company continues to extend well beyond accounting and taxation. Board meetings, statutory registers, annual returns, financial statement filings, auditor-related compliances, dematerialisation requirements, event-based disclosures and multiple regulatory reporting obligations often require professional assistance even when a company has limited operations.
The concern is not that companies should operate without accountability. The real question is whether the same intensity of compliance should apply to a closely held company with modest operations and no public investors as it does to a large enterprise with extensive public accountability.
India needs a proportionate corporate compliance framework—one that protects stakeholders without imposing unnecessary costs on genuine small businesses.
The objective should be simple: preserve transparency, prevent fraud and protect creditors, while allowing compliant businesses to spend more time building products, employing people and generating revenue.
1. Introduce a unified threshold for small and medium companies
The expansion of the small-company definition is an important step. Under the prescribed thresholds effective from 1 December 2025, the paid-up capital limit is ₹10 crore and the turnover limit is ₹100 crore, subject to the statutory exclusions and applicable conditions.
However, different provisions under the Companies Act, 2013 and the rules framed under it prescribe different thresholds for different purposes. As a result, a company may qualify as a small company under one provision but still face a separate compliance burden under another provision based on an unrelated threshold.
ComplianceDekho recommendation
The Ministry of Corporate Affairs should consider introducing a unified compliance classification for companies:
- Micro companies: Very small businesses with limited turnover and capital.
- Small companies: Closely held businesses operating within the prescribed small-company thresholds.
- Medium private companies: Businesses that have outgrown the small-company category but do not raise public funds or have significant public accountability.
- Large and public-interest companies: Entities requiring a more comprehensive compliance framework.
The classification should use clear, objective criteria based on turnover, paid-up capital, borrowings and public-interest exposure, with appropriate safeguards against artificial splitting of businesses.
A single classification framework would make it easier for businesses and professionals to determine which compliance obligations apply.
2. Introduce self-certified compliance for eligible private companies
Many routine provisions of company law are intended to ensure that a company maintains proper records, follows its internal procedures and makes prescribed disclosures. However, repetitive professional certification can sometimes add cost without proportionately improving the quality of information available to regulators.
ComplianceDekho recommendation
Eligible small and medium private companies should be permitted to file a self-certified annual compliance declaration confirming that:
- Statutory registers and prescribed records have been maintained.
- Applicable Board and shareholder approvals have been obtained.
- Financial statements and annual returns contain the required information.
- Related-party transactions and other prescribed disclosures have been appropriately recorded.
- No material non-compliance has been knowingly concealed.
Professional certification should remain mandatory for specified high-risk transactions, complex restructuring, public fundraising, significant related-party transactions and other cases where independent verification is necessary.
Random risk-based inspections, meaningful penalties for false declarations and clear accountability for directors would preserve deterrence.
The principle should be simple: routine compliance should be self-certified where appropriate, while high-risk compliance should receive independent scrutiny.
3. Rationalise statutory audit requirements for smaller companies
A statutory audit is an important safeguard. It promotes reliability of financial statements, strengthens governance and can help detect irregularities. However, the cost of an audit may be disproportionate for a very small, closely held company with simple transactions and no external investors.
The Limited Liability Partnership framework provides a useful point of comparison. Under the existing LLP Rules, the general audit exemption is linked to turnover not exceeding ₹40 lakh or contribution not exceeding ₹25 lakh, subject to the applicable conditions.
A proportionate company-law framework deserves consideration.
ComplianceDekho recommendation
The Government should examine a limited statutory-audit exemption or alternative assurance framework for eligible private companies that satisfy all of the following types of safeguards:
- Turnover and paid-up capital below prescribed limits.
- No listing, public deposits or public fundraising.
- No significant external institutional borrowing or public-interest exposure.
- No holding-company or subsidiary relationship that creates a material risk of avoiding consolidated oversight.
- Proper books of account, tax filings and annual financial disclosures.
- No material fraud indicators or unresolved regulatory findings.
The thresholds should be determined after consultation with the ICAI, ICSI, lenders, investors and other stakeholders.
A suitable model could provide for an independent accountant’s review or limited assurance engagement instead of a full statutory audit for the smallest eligible companies. Larger private companies would continue to undergo statutory audits.
The reform should not be a blanket exemption for every private company below a turnover threshold. It should be a carefully designed exemption based on both size and risk.
4. Introduce a single annual filing form for private companies
Companies routinely prepare financial statements, directors’ reports, annual returns, auditor-related information and multiple disclosures using overlapping corporate information.
Although the filings serve different legal purposes, companies frequently have to enter or reconcile the same information across multiple forms and attachments.
ComplianceDekho recommendation
MCA should introduce a Unified Annual Company Return for eligible private companies.
The proposed form could consolidate the common information presently reported through:
- AOC-4 or the applicable financial-statement filing form.
- MGT-7 or MGT-7A, as applicable.
- Prescribed annual governance and company-information disclosures.
- Auditor and Board-related information to the extent legally appropriate.
The unified return could contain separate schedules for financial statements, shareholding, directors, related-party transactions, audit information and other applicable disclosures.
Companies should enter common information only once. The MCA system should automatically populate recurring particulars from existing records and validate information against previous filings.
Separate forms should continue wherever an independent event, approval or statutory deadline genuinely requires them. The aim should be to eliminate duplication, not to combine legally distinct obligations mechanically.
5. Shift DPT-3 filing to October
DPT-3 reporting requires companies to compile information regarding outstanding receipts, loans, money and other amounts covered by the applicable reporting requirements.
The current annual reporting cycle generally requires the relevant return to be filed by 30 June for information as at 31 March, subject to the applicable rules and any notified extension.
For many companies, this deadline arrives before the annual financial statements and related records have been completely finalised. This can result in repeated reconciliations, provisional information and additional professional work.
ComplianceDekho recommendation
The annual DPT-3 filing deadline should be shifted from 30 June to 31 October.
The additional time would enable companies to reconcile their year-end balances with the finalised financial statements, loan confirmations, bank records and other relevant information.
The MCA should also consider a simplified declaration for companies that have no reportable outstanding amounts under the applicable reporting requirements.
The proposed change should not eliminate DPT-3 where the law requires it. It should align the reporting calendar with the availability of reliable financial information.
6. Rationalise MSME Form I reporting and the 45-day payment framework
The MSMED Act, 2006 establishes important protections for micro and small enterprises. Companies covered by the applicable rules must report specified outstanding payments to micro and small enterprise suppliers through MSME Form I.
The existing framework includes reporting obligations for specified payments outstanding beyond 45 days from acceptance or deemed acceptance, as applicable.
This can create operational difficulties where invoices are disputed, documentation is incomplete or payment reconciliation takes time.
ComplianceDekho recommendation
The Government should consider a more proportionate reporting framework while preserving the substantive payment protections available to micro and small enterprises.
Possible reforms include:
- Increasing the reporting trigger from 45 days to 90 days for eligible transactions, after reviewing the effect on supplier protection.
- Introducing a simplified declaration for companies with no qualifying outstanding MSME dues.
- Allowing automated reporting based on reconciled accounting records.
- Providing a correction mechanism for bona fide classification or reconciliation errors.
- Avoiding repetitive reporting of the same outstanding invoice across reporting periods without meaningful updates.
Any change in the 45-day reporting trigger must be carefully coordinated with the underlying MSMED Act provisions. A relaxation in Form MSME-1 should not inadvertently weaken a supplier’s statutory rights or alter the payment period prescribed by law.
7. Exempt eligible Section 8 companies from mandatory ISIN and dematerialisation requirements
Section 8 companies are established for charitable, social, educational, environmental, professional or other qualifying not-for-profit purposes. They do not operate in the same manner as ordinary commercial companies distributing profits to shareholders.
Nevertheless, a Section 8 company incorporated as a private company may fall within the scope of the applicable dematerialisation requirements if it does not qualify for an exemption.
The process of obtaining an ISIN, coordinating with a depository participant, establishing the required infrastructure and maintaining securities in dematerialised form can create administrative and financial costs, particularly for organisations that do not raise external equity capital.
ComplianceDekho recommendation
The Government should consider an express exemption from mandatory dematerialisation requirements for eligible Section 8 companies, subject to suitable safeguards.
The exemption could be available where:
- The company does not make a public offer or undertake public fundraising.
- Its securities are not listed.
- Its ownership and membership structure remains transparent.
- Applicable beneficial ownership and other statutory disclosures are maintained.
- It does not fall within a specified high-risk category.
The exemption should be implemented through the appropriate legal mechanism and coordinated with the applicable securities and depository framework.
The objective is not to weaken transparency. It is to avoid imposing a securities-market compliance mechanism on organisations for which it may have limited practical value.
8. Create a separate compliance regime for medium-sized private companies
The expansion of the small-company definition does not resolve every compliance concern. Some private companies may exceed one threshold by a relatively small amount and consequently become subject to multiple additional requirements.
Such companies may have no public shareholders, no listing, no public deposits and no complex group structure. Yet their compliance obligations can increase sharply because of threshold-based classifications.
ComplianceDekho recommendation
Introduce a Medium Private Company category under the Companies Act, 2013.
Eligibility could depend on prescribed turnover, paid-up capital, borrowings, ownership structure and public-interest exposure.
The category could receive proportionate relaxations from selected requirements, including:
- Simplified annual governance reporting.
- Reduced frequency of routine Board meetings, where appropriate.
- Simplified annual compliance certification.
- Relaxed dematerialisation requirements for eligible companies.
- Reduced repetitive event-based declarations.
- Proportionate penalties for procedural defaults.
Companies accepting public deposits, raising public capital or presenting heightened creditor or investor risks should remain subject to stricter requirements.
9. Remove unnecessary overlap between annual and event-based filings
A company may be required to report information when an event occurs and then report substantially the same information again in its annual return.
Examples can include changes in directors, share capital, registered particulars and other corporate information, depending on the specific legal requirement.
ComplianceDekho recommendation
MCA should develop a central corporate data repository under which information already filed and approved is automatically reflected in subsequent forms.
Where a change has already been duly reported through the prescribed event-based form, companies should not be required to re-enter the same information unless the annual form specifically requires confirmation of its continuing accuracy.
The system should distinguish between:
- Information already available in MCA records.
- Information that has changed during the year.
- Information that must be independently confirmed annually.
- Information that is required only in special circumstances.
This would reduce repetitive data entry, improve consistency and lower the risk of inadvertent discrepancies.
10. Introduce a common annual compliance calendar
Companies frequently manage multiple deadlines falling across different months. Some deadlines depend on the financial year-end, while others depend on the date of an event, a transaction or a statutory trigger.
ComplianceDekho recommendation
MCA should publish a consolidated annual compliance calendar for each category of company.
The calendar should distinguish between mandatory filings, conditional filings, event-based filings and declarations that apply only to specified companies.
A common digital dashboard should provide:
- Personalised due dates based on company classification.
- Automatic reminders to directors and authorised professionals.
- Pre-filled forms using existing MCA data.
- Warnings where two filings contain inconsistent information.
- A clear indication of whether a compliance is mandatory, conditional or not applicable.
A single dashboard would not remove statutory obligations, but it would make them easier to understand and administer.
11. Rationalise routine Board meeting requirements
Board meetings serve an essential governance function. However, the prescribed frequency and procedural requirements can be burdensome for companies with simple operations and a small number of directors.
ComplianceDekho recommendation
Eligible small and medium private companies should be considered for a simplified Board meeting framework, subject to safeguards.
The framework could permit reduced meeting frequency for companies that have no public-interest exposure, no complex financing arrangements and no material unresolved governance concerns.
Matters requiring specific approval under the Act, the rules or other applicable laws would continue to require the prescribed Board or shareholder approval.
The reform should simplify the frequency and administration of meetings, not eliminate the need for proper corporate decisions, minutes or accountability.
12. Simplify statutory registers and routine corporate records
Maintaining statutory registers is important for determining ownership, governance responsibilities and the history of corporate decisions.
However, maintaining multiple registers with overlapping information can create unnecessary administrative work.
ComplianceDekho recommendation
MCA should prescribe a standardised digital register framework for eligible companies, with a common data structure for directors, members, charges, contracts and other applicable particulars.
Where the same information is already available in an authenticated statutory register, duplicate recording should be avoided unless expressly required by law.
Small companies should be permitted to maintain specified registers electronically, subject to reasonable access, retention, integrity and inspection safeguards.
13. Rationalise event-based filings for immaterial changes
Not every corporate change presents the same level of risk to creditors, shareholders or the public.
A material change in ownership, management or capital structure may require prompt reporting. A purely administrative correction may not deserve the same degree of procedural complexity.
ComplianceDekho recommendation
The Government should review event-based filing requirements and classify them according to materiality.
The framework could distinguish between:
- Material changes requiring prompt statutory filing.
- Routine changes eligible for a simplified electronic intimation.
- Correctable clerical errors eligible for a low-cost rectification process.
- Changes that can be captured through the next annual return where immediate reporting serves no substantial regulatory purpose.
Any relaxation should preserve the requirements of the Act and the rights of stakeholders who rely on public corporate records.
14. Introduce a simplified regime for dormant and inactive companies
Many companies are incorporated for a specific project, investment, future business opportunity or group restructuring. Some remain inactive for extended periods without conducting significant operations.
Such companies may continue to face recurring compliance expenses despite having no material business activity.
ComplianceDekho recommendation
Eligible inactive companies should be offered a simplified annual declaration confirming that:
- No material business activity has taken place, as defined under the applicable framework.
- Statutory records and bank balances have been reconciled.
- There are no undisclosed liabilities or material regulatory proceedings.
- The company has complied with the requirements applicable to its inactive status.
The simplified regime should be linked to a transparent eligibility test. It should not be available to companies that use inactivity to conceal transactions, avoid creditors or evade statutory obligations.
15. Simplify annual reporting for companies with no revenue
A company may be newly incorporated, awaiting approvals, developing a product or temporarily inactive. It may have no operating revenue during a financial year but still be required to prepare and file financial statements and other applicable reports.
ComplianceDekho recommendation
MCA should introduce a simplified reporting schedule for eligible companies with no revenue and limited transactions.
The schedule could reduce repetitive narrative disclosures where they are not relevant, while retaining financial statements, applicable audit requirements, directors’ responsibilities and material disclosures.
The test should consider actual transactions, assets, liabilities and risk—not revenue alone. A company with no revenue may still hold significant assets, borrowings or investments requiring proper reporting.
16. Rationalise the applicability of cost audit and internal audit
Cost audit and internal audit requirements are intended to strengthen oversight and improve the quality of corporate information. However, their applicability can depend on complex combinations of industry classification, turnover and other criteria.
ComplianceDekho recommendation
The Government should periodically review the thresholds and scope of cost audit and internal audit to ensure that they remain proportionate to the size, nature and risk of the business.
For eligible companies with simple operations, low risk and no public-interest exposure, the framework could consider simplified internal-control reporting or a more proportionate assurance requirement.
Any change should preserve the safeguards needed in sectors where cost structures, public funds, regulated activities or complex operations justify additional scrutiny.
17. Provide a proportionate compliance framework for wholly owned subsidiaries
A wholly owned subsidiary may be required to maintain its own statutory records and fulfil its own legal obligations, even where its parent company exercises complete ownership and control.
Separate legal personality remains important, and the subsidiary’s creditors and other stakeholders must be protected. However, certain repetitive disclosures may add limited value where equivalent information is already available at the group level.
ComplianceDekho recommendation
Eligible wholly owned subsidiaries should be considered for simplified reporting of information already disclosed in the holding company’s consolidated records, subject to safeguards.
The reform could permit cross-referencing of specified group information, reduce duplicate declarations and introduce standardised inter-company reporting.
The subsidiary should continue to maintain its own books of account, financial statements, statutory records and other records required by law. Related-party transactions, guarantees, loans and other material dealings must remain appropriately disclosed.
18. Simplify compliance for Section 8 companies and genuine not-for-profit organisations
Section 8 companies contribute to education, healthcare, research, social development, professional development and other public-benefit activities.
Their governance needs to remain transparent, especially where they receive donations, grants, foreign contributions or public funds. However, their compliance requirements should also reflect their not-for-profit nature.
ComplianceDekho recommendation
The Government should consider a dedicated compliance framework for eligible Section 8 companies that do not have significant commercial operations or public-market exposure.
Possible measures include simplified annual declarations, proportionate governance reporting, reduced duplication in routine filings and targeted exemptions from requirements that are primarily designed for commercial securities or profit-distributing entities.
The framework should not dilute financial accountability, restrictions on distribution of profits, related-party safeguards or the requirements of other applicable laws.
19. Introduce a reasonable rectification window for procedural defaults
Companies may occasionally miss a filing deadline or make an inadvertent error because of technical issues, staff changes, professional transitions or genuine misunderstanding.
A proportionate system should distinguish between an honest, promptly corrected procedural default and deliberate concealment or repeated non-compliance.
ComplianceDekho recommendation
Provide a defined rectification window for eligible procedural defaults, with reasonable additional fees where appropriate.
Companies that voluntarily correct errors within the prescribed period could receive reduced penalties or a simplified adjudication process where the law permits.
The relaxation should not apply to fraud, wilful misstatements, diversion of funds, concealment of beneficial ownership or defaults that materially prejudice investors and creditors.
20. Simplify the compliance framework for One Person Companies
One Person Companies (OPCs) are intended to provide a formal corporate structure for individual entrepreneurs.
Although OPCs benefit from certain relaxations, the compliance framework can still be complex for a business operated by a single individual with limited transactions.
ComplianceDekho recommendation
Consider a simplified annual filing and governance framework for eligible OPCs, particularly those with modest turnover, simple ownership and no public-interest exposure.
The framework could use pre-filled annual forms, simplified declarations and fewer repetitive disclosures while retaining appropriate accounting, tax and statutory requirements.
21. Align corporate compliance thresholds with inflation and economic growth
Thresholds that are reasonable when introduced may become outdated over time as business costs, turnover and the scale of commercial operations increase.
Without periodic review, companies may cross regulatory thresholds merely because of nominal business growth, even where their underlying risk profile has not changed substantially.
ComplianceDekho recommendation
MCA should establish a periodic review mechanism for key thresholds under the Companies Act, 2013 and the rules framed under it.
A review every three years could consider inflation, economic growth, the distribution of company sizes, the cost of compliance and the impact on creditor and investor protection.
The review should be transparent, evidence-based and conducted in consultation with industry bodies and professional institutes.
22. Introduce a regulatory impact assessment before new compliance obligations
New compliance requirements often serve legitimate purposes. However, the cumulative cost of a new form, register, certification, reporting deadline or system requirement may not always be assessed from the perspective of smaller businesses.
ComplianceDekho recommendation
Before introducing a significant new compliance obligation, MCA should publish a short regulatory impact assessment addressing:
- The specific regulatory problem being addressed.
- The companies that will be affected.
- The expected compliance cost.
- Whether existing filings already provide the required information.
- Whether a risk-based or digital alternative is available.
- The expected benefit to creditors, investors and regulators.
A proportionate assessment would help ensure that new obligations are necessary, effective and appropriately targeted.
23. Provide a formal safe harbour for bona fide procedural errors
The Companies Act, 2013 already contains different penalty and adjudication mechanisms for various defaults. Nevertheless, businesses can face uncertainty when interpreting whether an inadvertent procedural error will lead to substantial consequences.
ComplianceDekho recommendation
Introduce a clearer safe-harbour framework for specified technical defaults where:
- There is no fraud or wilful concealment.
- No material information has been withheld.
- No investor or creditor has suffered material prejudice.
- The company voluntarily corrects the error within the prescribed time.
- The company has not repeatedly committed the same default.
The framework should operate within the statutory powers available to the Government and adjudicating authorities. It should improve predictability without creating immunity for substantive violations.
24. Make MCA compliance digital by default and data-entry-free wherever possible
Digital filing is not the same as simplified compliance. A lengthy form submitted online may still impose a substantial burden if it requires companies to enter information that the Government already possesses.
ComplianceDekho recommendation
MCA should move towards a pre-filled, data-driven compliance system that uses verified information already available in its records.
The system should support:
- Automatic population of company and director details.
- Reuse of previously filed information where legally appropriate.
- Common data fields across related forms.
- Automated deadline reminders.
- Validation against existing statutory records.
- Clear explanations for each mandatory field.
- A single dashboard for annual and event-based obligations.
The long-term objective should be to make compliance a verification exercise rather than a repetitive data-entry exercise.
25. Create a dedicated compliance code for small and medium private companies
The most effective reform would be to bring together the various relaxations available to eligible private companies under a coherent framework.
At present, a company may need to examine multiple provisions, rules, exemptions and notifications to determine its obligations.
ComplianceDekho recommendation
MCA should consider introducing a consolidated compliance code or a dedicated chapter for eligible small and medium private companies.
It could clearly specify:
- Applicable annual filings.
- Board and shareholder meeting requirements.
- Audit and assurance obligations.
- Statutory register requirements.
- Dematerialisation applicability.
- Event-based filings.
- Related-party and beneficial ownership disclosures.
- Available exemptions and eligibility conditions.
- Penalties, rectification mechanisms and loss of eligibility.
A single reference framework would reduce interpretational difficulties for entrepreneurs, directors and professionals.
Implementation roadmap: How should these reforms be introduced?
Not every reform requires an amendment to the Companies Act, 2013. The Government could adopt a phased approach.
Phase I — Administrative and digital simplification
- Pre-filled forms and a common compliance dashboard.
- Reduction of duplicate data entry.
- Better alignment of filing calendars where legally permissible.
- Standardised declarations and rectification procedures within existing powers.
Phase II — Rule amendments and targeted exemptions
- Review of prescribed thresholds.
- Simplified requirements for eligible Section 8 companies.
- Rationalisation of selected reporting and dematerialisation requirements, where legally permissible.
- Review of the DPT-3 reporting calendar.
Phase III — Legislative reform
- A unified annual filing framework.
- A dedicated medium-private-company category.
- A proportionate statutory audit or assurance framework.
- Broader self-certification and safe-harbour provisions.
- Amendments to primary legislation wherever required.
Every reform should be accompanied by a clear eligibility test, an implementation date and practical guidance for companies and professionals.
Conclusion: Compliance should protect business, not obstruct it
The Companies Act, 2013 plays an essential role in protecting investors, creditors, employees and other stakeholders. The objective of reform should not be to weaken that framework.
Instead, India should move towards a model in which the intensity of compliance corresponds to the size, complexity and risk of the company.
A large listed company, a public-interest enterprise and a closely held private company with modest operations do not present identical regulatory risks. Their compliance frameworks should reflect those differences.
Self-certification for routine matters, proportionate audit requirements, consolidated annual filings, simplified reporting for eligible Section 8 companies, sensible thresholds and a data-driven MCA portal could materially improve the ease of doing business.
The success of corporate law should not be measured by the number of forms a company files or the number of registers it maintains. It should be measured by the quality of information available, the protection provided to stakeholders and the ability of honest businesses to operate efficiently.
India does not need less accountability. It needs smarter accountability.
Disclaimer: This article presents policy recommendations and proposals for discussion. The suggested relaxations are not statements of existing law. Companies must continue to comply with the Companies Act, 2013, applicable rules, notifications and other laws in force. Any proposed exemption, threshold change or reporting relaxation would require the appropriate legal or regulatory action.
ComplianceDekho.com — Empowering your Hustle. Silently.
