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The Corporate Laws (Amendment) Bill, 2026

Aug 2026 10 min read Ali Abbas
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On 23 March 2026, the Union Minister of Finance and Corporate Affairs introduced The Corporate Laws (Amendment) Bill, 2026 in the Lok Sabha. The Bill proposes changes to company law and the LLP Act, but will not change existing law until it is passed, notified and the relevant rules are issued.

INTRODUCTION

On 23 March 2026, the Union Minister of Finance and Corporate Affairs introduced The Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026) (the Bill) in the Lok Sabha. On the same day, the Bill was referred to a Joint Committee of both Houses of Parliament (JPC) for examination. The JPC submitted its report on 3 August 2026 and recommended that the Bill be passed with certain changes. As of 27 August 2026, neither House has passed the Bill. Therefore, until it is passed and its provisions are notified, The Companies Act, 2013 (Act) and The Limited Liability Partnership Act, 2008 (LLP Act) will continue to apply in their current form.

The Bill has 107 clauses and continues the reform process of converting certain company law offences into civil defaults that attract penalties instead of imprisonment or court imposed fines. It proposes to remove imprisonment and court fines for certain procedural defaults, increase the thresholds for small companies, narrow the scope of companies required to undertake corporate social responsibility (CSR) and simplify fast-track mergers. However, many of these benefits will apply only to prescribed classes of companies after the Ministry of Corporate Affairs (MCA) issues the relevant rules. Hence, the Bill remains a proposed reform and will not change the existing law until it is passed, notified and the relevant rules are issued.

KEY CHANGES TO THE COMPANIES ACT, 2013

Decriminalisation and Recovery of Penalties

The Bill converts more defaults under the Act into civil penalties instead of imprisonment or court fines. For example, breaches of the books-of-account requirements under Section 128 of the Act may attract a penalty of up to Rs. 5 lakh for listed companies and Rs. 50,000 for others. Failure to provide information sought by the Registrar under Section 206 of the Act may also attract penalties. Similar changes apply to breaches of rules made under Section 469 of the Act and certain prospectus and producer-company defaults. The Bill also increases the limits for compounding offences by Regional Directors under Section 441 of the Act to reduce the burden on the National Company Law Tribunal (NCLT).

At the same time, proposed new Sections 454B to 454D of the Act make unpaid penalties easier to recover. A Recovery Officer may attach and sell property, freeze bank accounts, appoint a receiver or order arrest using the recovery mechanisms under the Income-tax Act, 1961. In short, while the risk of imprisonment is reduced, unpaid penalties may become harder to avoid.

Higher Thresholds for Small Company

A ‘small company’ under Section 2(85) of the Act is defined based on limits for paid-up capital and turnover. The Bill proposes to increase the maximum limits that the Government may prescribe from Rs. 10 crore to Rs. 20 crore for paid-up capital and from Rs. 100 crore to Rs. 200 crore for turnover. However, the limits currently in force remain Rs. 4 crore and Rs. 40 crore respectively, as prescribed under the 2022 Rules. Therefore, the Bill does not automatically change a company’s status. Any change will take effect only when the MCA amends the relevant rules.

Corporate Social Responsibility

Under Section 135 of the Act, Corporate Social Responsibility (CSR) obligations apply to companies that meet certain thresholds based on net worth, turnover or net profit. The Bill proposes to increase the net-profit threshold from Rs. 5 crore to Rs. 10 crore or such other amount as may be prescribed. It also extends the time for transferring unspent CSR funds for ongoing projects from 30 days to 90 days and increases the threshold below which a CSR committee is not required from Rs. 50 lakh to Rs. 1 crore. The Bill also proposes to allow the Government to exempt certain classes of companies from CSR obligations under the proposed new Section 135(10).

Corporate Governance, Compliance and Audit Reforms

The Bill proposes to modernise corporate compliance by allowing companies to hold Annual General Meetings physically, virtually or in a hybrid format, subject to certain safeguards. It also promotes digital communication and replaces some affidavit requirements with simpler self-declarations.

The Bill also proposes changes to the audit framework. Certain prescribed companies may be exempt from appointing an auditor while stricter independence requirements will apply to auditors of larger companies. The National Financial Reporting Authority (NFRA), which regulates and oversees auditors and audit quality in India will also receive wider powers to investigate and enforce compliance. However, the JPC has recommended replacing the proposed imprisonment for non-compliance with NFRA orders with monetary penalties.

Mergers, Buy-Backs and Employee Shares

Section 233 of the Act allows small companies and holding companies to merge with their wholly owned subsidiaries through a faster process approved by the Regional Director instead of following the full NCLT process under Sections 230 to 232 of the Act. Currently, this requires approval from members holding 90 per cent of the shares and creditors holding nine-tenths in value. The Bill proposes to lower these thresholds to a majority of members present and voting who hold at least 75 per cent in value and creditors holding at least three-fourths in value. The JPC has accepted the lower thresholds but recommended stronger protection for minority shareholders including a fair value exit or buy out option for those who disagree with the fast-track merger.

Under Section 68 of the Act, a buy-back is currently capped at 25 per cent of a company’s paid-up capital and free reserves. The Bill proposes to allow certain companies, mainly debt-free companies to buy back a higher prescribed percentage and make up to two buy-back offers a year which is at least six months apart. The Bill also proposes to amend Section 62 of the Act to allow employees to receive shares under schemes linked to the value of the share capital, giving statutory recognition to restricted stock units and stock appreciation rights alongside employee stock options.

Valuation

The Bill proposes to rewrite Section 247 of the Act so that valuations under the Act can be carried out only by registered valuers who hold the required certificate and are members of a recognised valuers’ organisation. The Insolvency and Bankruptcy Board of India (IBBI) will be designated as the Valuation Authority and will oversee the registration of valuers, recognition of valuers’ organisations, valuation standards and compliance.

CHANGES TO THE LLP ACT, 2008

The Bill proposes several changes to the Limited Liability Partnership Act, 2008 (LLP Act). It introduces provisions for International Financial Services Centre (IFSC) LLPs, allowing them to maintain contributions and accounts in a permitted foreign currency, while fees, fines and penalties will continue to be paid in rupees. It also simplifies the incorporation process by requiring the professional declaration under Section 11 of the Act, only where a professional has actually been engaged. A proposed new Section 57A of the Act will allow specified trusts registered with the Securities and Exchange Board of India (SEBI) or the International Financial Services Centres Authority (IFSCA) to convert into LLPs, particularly investment funds set up as trusts. The Bill also proposes to convert certain LLP offences into civil penalties, similar to the changes proposed under the Companies Act.

CONCLUSION

The Bill marks another important step towards simplifying corporate compliance and reducing criminal consequences for procedural and technical defaults. However, its practical impact will depend not only on its passage and notification but also on the rules that the MCA will issue for several key changes. If implemented as proposed, the reforms could provide greater flexibility to companies in areas such as mergers, buy-backs, employee share schemes, meetings and compliance. At the same time, the Bill strengthens enforcement by making unpaid penalties easier to recover and increasing regulatory oversight in certain areas. Overall, while the Bill offers meaningful compliance relief, companies and professionals will need to closely follow the final version of the legislation and the rules issued under it before relying on the proposed changes.