Threshold Limits Under the Companies Act, 2013: Complete Compliance Guide
Not all companies are treated equally under the Companies Act, 2013. Some face more compliance, others less, and it all depends on something called threshold limits.
These aren’t just numbers. They decide when your company must appoint a woman director, conduct secretarial audits, or start CSR spending. Missing even one can result in penalties, often before a company fully realises what triggered the obligation
In this blog, we break down these threshold limits clearly and simply, so you know exactly where your company stands and what to do next.
To understand how these legal triggers work, we first need to get clear on what a “threshold limit” actually means under the Companies Act.
What is a Threshold Limit under the Companies Act?
A threshold limit refers to a specific benchmark, usually in terms of paid-up share capital, turnover, borrowings, or employee strength, which triggers mandatory compliance with certain provisions of the Companies Act, 2013.
These limits act as control points. Once a company crosses them, additional obligations come into play, such as board composition, audits, or disclosures.
Now that we know what threshold limits are, the next question is who exactly do these limits apply to?
Applicability of the Companies Act, 2013: Who Needs to Follow What?
The Companies Act, 2013, applies to all types of companies: public, private, listed, unlisted, and even certain foreign companies operating in India. However, not every rule is applicable to every company equally. That’s where threshold limits come into play.
Understanding your company’s structure and financials will help you determine which thresholds you need to keep track of.
Let’s zoom in on some foundational requirements before diving into the threshold-based ones.
Minimum Members in a Private Company
To form a valid private limited company under Section 3 of the Companies Act, you need:
- Minimum: 2 members
- Maximum: 200 members (excluding current and former employees who are also shareholders)
Exceeding this member cap means you may need to convert into a public company.
Now that we know how many members are needed, what about the people who run the company?
Minimum Number of Directors in a Private Company
Section 149 of the Companies Act,2013 mandates the board composition of companies:
- Private Company → Minimum 2 directors
- Public Company → Minimum 3 directors
- One Person Company (OPC) → Minimum 1 director
The maximum number of directors allowed without a special resolution is 15.
While these are entry-level requirements, real challenges arise when your company starts growing. That’s where threshold-triggered compliances step in.
Key Threshold Limits That Trigger Compliance
Let’s break it down: when your company hits certain financial or structural benchmarks, the law expects more from you. These are called compliance triggers, and here’s what they look like in action:
- Corporate Social Responsibility (CSR)
If your net worth is ₹500 crore, turnover is ₹1000 crore, or net profit is ₹5 crore or more, CSR rules kick in. You must start spending on eligible social causes.
(Section 135 – Applies to all companies)
- Appointment of a Woman Director
Public companies with a paid-up capital of ₹100 crore or a turnover of ₹300 crore (or any listed company) must appoint at least one woman director.
(Section 149 – Public companies only)
- Internal Auditor Requirement
Public companies with big operations — say turnover of ₹200 crore, capital of ₹50 crore, or significant loans/deposits — need to appoint an internal auditor.
(Section 138 – Mostly public, some private companies)
- Secretarial Audit
If you’re a listed company or a public company with a paid-up capital of ₹50 crore or a turnover of ₹250 crore, a secretarial audit becomes mandatory.
(Section 204 – Public companies)
- Rotation of Auditors
For any company with capital over ₹10 crore, or a private company with turnover or borrowings of ₹50 crore, changing your auditor periodically is a must.
(Section 139 – All companies)
- Key Managerial Personnel (KMP)
Public companies with capital of ₹10 crore or more, or any listed company, must appoint top-level officers like MD, CEO, CFO, and CS.
(Section 203 – Public companies)
- Think of these thresholds as checkpoints. Once you cross them, your compliance journey levels up with more rules, more responsibilities, and often, more scrutiny.
To simplify it, here’s a handy table listing major compliance requirements that are activated once a company crosses a particular threshold under the Companies Act, 2013:
| Compliance Trigger | Threshold Limit | Applicability | Relevant Section |
| CSR (Corporate Social Responsibility) | Net worth ≥ ₹500 cr, OR Turnover ≥ ₹1000 cr, OR Net profit ≥ ₹5 cr | All companies | Sec 135 |
| Appointment of Woman Director | Listed Co. & Public Co. with PUC ≥ ₹100 cr OR TO ≥ ₹300 cr | Public Companies | Sec 149(1) proviso |
| Internal Auditor Appointment | Listed Co., or Public Co. with: TO ≥ ₹200 cr, PUC ≥ ₹50 cr, Loans ≥ ₹100 cr, Deposits ≥ ₹25 cr | Public & some Private Cos. | Sec 138 |
| Secretarial Audit | Listed Co., or Public Co. with: PUC ≥ ₹50 cr OR TO ≥ ₹250 cr | Public Companies | Sec 204 |
| Rotation of Auditors | PUC ≥ ₹10 cr or Private Co. with TO ≥ ₹50 cr or borrowings ≥ ₹50 cr | All Companies | Sec 139 |
| KMP Appointment (MD, CEO, CS, CFO) | Listed Co., or Public Co. with PUC ≥ ₹10 cr | Public Companies | Sec 203 |
PUC = Paid-Up Capital, TO = Turnover
This table simplifies the complexity, but how do these thresholds impact companies in real scenarios?
Real-life scenario illustration
Imagine you run a private company with a ₹120 crore turnover and ₹60 crore in borrowings. You’re now liable for:
- Appointing an internal auditor
- Complying with auditor rotation norms
Without realising it, a company could step into a whole new world of compliance just by growing.
This is why regular financial reviews aren’t just for investors, they’re essential for staying compliant.
What is the Threshold Limit for a Private Company?
There’s no single threshold limit for private companies, but different rules kick in based on what activity you’re assessing. Here are some of the most common ones:
- CSR: If your private company has a net profit of ₹5 crore or more
- Auditor Rotation: Turnover of ₹50 crore or more
- Internal Audit: Turnover of ₹200 crore or more or Borrowings of ₹100 crore or more.
The moment your company crosses any of these, the relevant compliance becomes mandatory.
To help you track these, let’s define the common financial terms used.
Common Threshold Terms Explained
To interpret threshold limits accurately under the Companies Act, 2013, it is important to first understand the financial terms commonly used as benchmarks. These terms form the basis for determining when specific compliance requirements become applicable.
| Term | Meaning |
| Net Worth | Total assets – Total liabilities |
| Turnover | Gross revenue from operations |
| Paid-Up Capital | Actual capital received from shareholders |
| Borrowings | Loans and other financial debts taken by the company |
| Net Profit | Profit after tax, as per P&L statement |
When reviewing compliance status, always use the figures disclosed in the most recent audited financial statements.
Frequently Asked Questions(FAQs)
1. What is a threshold limit?
A threshold limit is a set benchmark, like a specific amount of turnover, capital, or net profit, that determines when certain rules under the Companies Act, 2013 start applying to a company. Once your company crosses that mark, you need to follow extra compliance requirements.
2. When do these limits start applying?
They’re based on your previous year’s numbers. If you crossed a limit in FY2024, the rules apply from FY2025.
3. When does CSR become mandatory?
If your company has either:
- Net worth of ₹500+ crore,
- Turnover of ₹1000+ crore, or
- Net profit of ₹5+ crore,
Then you must spend at least 2% of average profits on social work.
4. Do all companies need a Company Secretary?
No! Only listed companies and public ones with ₹10 crore+ paid-up capital must have a full-time CS.
5. When do I need a Secretarial Audit?
If you’re a listed company or a public company with:
- Paid-up capital of ₹50+ crore, or
- Turnover of ₹250+ crore.
It’s a legal health check!
6. What’s the limit for Related Party Transactions?
If the deal is more than 10% of turnover or net worth, you’ll need board approval, and sometimes shareholders too.
7. Who needs an Internal Auditor?
Large companies with big capital, loans, or turnover must appoint one. It helps catch issues early.
8. When does Auditor Rotation kick in?
If your company has paid-up capital above ₹10 crore or high turnover/borrowings, you’ll need to change auditors after a few years to keep things fair.
9. What makes a company a ‘small company’?
If it has:
- Paid-up capital up to ₹4 crore, and
- Turnover up to ₹40 crore,
Then it’s a ‘small company’ and gets lighter compliance.
10. Are private and public companies the same?
No. Public and listed companies usually hit compliance sooner, even at lower thresholds.
11. Can I track these thresholds before it’s too late?
Yes! Set up regular financial check-ins or use accounting software to alert you when you’re close.
12. What happens if I ignore a threshold?
You might face fines, disqualifications, or legal trouble.
Conclusion
Threshold limits under the Companies Act aren’t merely rules on paper, they grow with your business. As your company’s size, profits, or turnover increases, certain legal responsibilities kick in. These limits are there to make sure your business stays transparent, fair, and well-managed. Whether you’re starting up or scaling fast, knowing these checkpoints helps you plan better, avoid fines, and stay on the right side of the law.
