Introduction

Every few years, a piece of legislation comes along that practitioners end up referring to for the better part of a decade. The Corporate Laws (Amendment) Bill, 2026 is shaping up to be exactly that kind of law. Introduced in the Lok Sabha on March 23, 2026 by Union Finance and Corporate Affairs Minister Nirmala Sitharaman, the Bill proposes changes across 107 clauses of the Companies Act, 2013 and the Limited Liability Partnership Act, 2008 — arguably the most significant revision to India's corporate law framework since the decriminalisation exercise of 2020.

What makes this Bill worth a closer look is not just its scale but its underlying philosophy. It tries to do two things at once: reduce the criminal exposure faced by companies and directors for routine, procedural lapses, while simultaneously tightening the screws on auditors, valuers and directors where genuine governance risk exists. As of early August 2026, the Bill has cleared an important milestone — the Joint Parliamentary Committee (JPC) examining it has tabled its report in Parliament, recommending its adoption with a set of clause-wise modifications. It has not yet been passed into law.

Background: Why the Government Felt This Was Necessary

The Companies Act, 2013 has been amended multiple times since it came into force — in 2015, 2017, 2019 and 2020 — largely to correct implementation difficulties flagged by the Company Law Committee and industry stakeholders. Even so, a recurring complaint from India Inc, especially small and mid-sized companies, has been that the compliance architecture treats a missed filing deadline with almost the same severity as a genuine act of fraud. Company secretaries and finance teams have long argued that this blurring of lines does little for governance while adding real litigation risk for ordinary businesses.

The Corporate Laws (Amendment) Bill, 2026 draws on the recommendations of the High Level Committee on Non-Financial Regulatory Reforms and builds on the Company Law Committee's earlier work. Its stated objectives are to ease compliance for companies with a clean track record, apply enforcement in proportion to actual risk, and modernise processes that were designed for a paper-based era. At the same time, the government has been careful to signal that this is not a blanket dilution of oversight — the Bill pairs relief on procedural matters with sharper accountability for gatekeepers such as auditors, valuers and directors.

Where the Bill Currently Stands

It helps to be precise about the Bill's legislative status, since several provisions could still change before enactment.

•      March 23, 2026: Introduced in the Lok Sabha as Bill No. 85 of 2026 and, on the same day, referred to a Joint Parliamentary Committee for detailed scrutiny.

•      The JPC, chaired by BJP MP Sudheer Gupta, held consultations with the Ministry of Corporate Affairs, NFRA, IBBI, industry bodies, professional institutes and legal experts over several months.

•      August 3, 2026: The JPC tabled its report in both the Lok Sabha and Rajya Sabha, recommending adoption of the Bill with a series of clause-wise modifications.

•      The Bill has not yet been passed by Parliament or notified. Subordinate rules — which will fix the actual thresholds, prescribed classes and effective dates for several provisions — are yet to be drafted.

Practically, this means the provisions discussed below should be read as the direction of travel rather than settled law. Readers should track the Bill's passage on the Ministry of Corporate Affairs website and PRS Legislative Research before relying on any specific number for a live transaction.

Key Provisions Under the Companies Act, 2013

1. Decriminalisation of Procedural Offences

The Bill's central theme is moving a defined set of offences out of the criminal justice system and into a civil penalty framework. Offences proposed for decriminalisation include wilful failure by a producer company to furnish information about its affairs, contravention of prescribed Rules, failure to furnish information or documents sought by the Registrar of Companies, violations relating to the maintenance of books of account, and failure to comply with a Registrar's requisition other than a summons.

For these categories, the Bill substitutes imprisonment or fine with a civil penalty. Several commentators tracking the Bill note that the government intends to route these matters through an in-house adjudication process rather than the criminal courts, which — if implemented as reported — would meaningfully cut down the time and cost involved in resolving routine defaults. Directors, promoters and key managerial personnel would no longer face the prospect of arrest or a criminal record for lapses of this kind, though the exact penalty structure will only be confirmed once the Bill is enacted and rules are notified.

2. Revised CSR Applicability Threshold

Under the existing Section 135 framework, a company must spend at least 2% of its average net profit of the preceding three years on Corporate Social Responsibility if it meets any one of three tests: net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more. The Bill raises the net-profit trigger to Rs 10 crore, or such other sum as may be prescribed, and separately allows companies meeting prescribed conditions to be exempted from CSR compliance altogether.

This was also one of the more contested provisions when the Bill was introduced. Opposition members, including MPs from the Congress, the TMC and the DMK, argued during the introduction debate that raising the threshold could dilute CSR spending at a time when corporate social contribution is still seen as inadequate in several sectors. The JPC's report has since recommended CSR relaxation specifically for eligible small companies, while leaving the broader framework intact — a middle path that tries to address both the compliance-burden argument and the dilution concern.

3. Higher Thresholds for 'Small Company' Classification

Small companies enjoy a lighter compliance regime under the Act — fewer board meetings, simplified financial statements, and exemption from mandatory rotation of auditors, among other things. Currently, a company qualifies as small if its paid-up capital does not exceed Rs 50 lakh (or a higher prescribed amount up to Rs 10 crore) and its turnover does not exceed Rs 2 crore (or a higher prescribed amount up to Rs 100 crore). The Bill raises these upper limits substantially — to Rs 20 crore for paid-up capital and Rs 200 crore for turnover — which would bring a much larger set of mid-sized companies within the small company net.

4. Digital-First Compliance and AGM Flexibility

The Bill formally recognises what many companies have already been doing out of necessity since the pandemic. It permits companies to hold their Annual General Meeting either physically or through video conferencing or other audio-visual means, subject to holding at least one physical AGM every three years. It also enables electronic service of prescribed classes of documents by prescribed classes of companies, replaces certain affidavits with simple self-declarations, and exempts companies meeting prescribed conditions from the requirement to appoint a statutory auditor.

5. Relaxed Merger and Buy-back Thresholds

For fast-track mergers — between two or more small companies, or between a holding company and its wholly-owned subsidiaries — the Act currently requires approval from shareholders and creditors holding at least 90% in value. The Bill reduces this to approval by members and creditors present and voting who hold at least 75% in value, which should meaningfully ease consolidation within corporate groups. On buy-backs, the Bill retains the general 25% cap on paid-up capital and free reserves but allows prescribed classes of companies to buy back a higher prescribed percentage.

The JPC's report has reportedly gone a step further on the merger changes, recommending that dissenting shareholders in fast-track mergers be given a formal exit right — a safeguard meant to balance the lower approval threshold with adequate minority protection.

6. Expanded Powers for NFRA

The National Financial Reporting Authority, set up under the 2013 Act to oversee accounting and auditing standards, gets a materially wider mandate under the Bill. It would be empowered to frame regulations on how investigations are conducted, and to issue advisories, censures or warnings as part of its enforcement toolkit — powers that go beyond its present largely monitoring-oriented role. The JPC has separately recommended strengthening NFRA's role further and improving corporate reporting standards generally, so this is an area where the final enacted text may go even further than the version introduced in March.

7. IBBI Designated as the Valuation Authority

Perhaps the most structurally significant change for the valuation profession is the designation of the Insolvency and Bankruptcy Board of India (IBBI) as the Valuation Authority under the Act. IBBI would take over responsibility for granting certificates of registration and recognition to registered valuers, recommending valuation standards to the central government, and monitoring compliance — consolidating oversight that has so far been spread across multiple bodies. Professionals engaged in valuations for company law purposes, including in M&A, share swaps and fairness opinions, should expect a more standardised but also more closely monitored regime once this is notified.

8. Sharper Director Accountability

Alongside the relief measures, the Bill tightens accountability for directors in specific ways. Section 164 is proposed to be amended to introduce a 'fit and proper' requirement, under which boards would need to assess and formally document that every director meets prescribed eligibility criteria — turning what has largely been a matter of commercial judgment into a documented compliance obligation. Separately, defaults relating to related-party transactions under Section 188 are proposed to attract disqualification of the directors who approved the transaction, extending personal liability beyond the company itself. A new provision is also expected to formalise the resignation process for key managerial personnel who are not directors.

9. Recognition of Employee Compensation Schemes Beyond ESOPs

The Act currently recognises the issuance of Employee Stock Options. The Bill broadens this to formally recognise other share-value-linked compensation structures such as Restricted Stock Units and Stock Appreciation Rights — instruments that many companies, particularly startups and listed entities, already use but which have lacked explicit statutory recognition under the Companies Act.

Key Provisions Under the LLP Act, 2008

On the LLP side, the headline change is a new pathway for converting specified trusts into LLPs. This applies to trusts constituted under the Indian Trusts Act, 1882 or any other central or state statute, provided they are registered with SEBI or an IFSC Authority and are engaged in prescribed activities. This is aimed squarely at the fund management industry, where trust structures are common but LLPs are often seen as more operationally convenient for pooled investment vehicles. The JPC has reportedly recommended that such conversions carry regulatory consent requirements and adequate investor confidentiality protections — a sensible check given that the entities involved typically hold third-party money.

Table: Select Thresholds — Before and After

What the JPC Recommended

Beyond endorsing the Bill's broad direction, the JPC's August 3, 2026 report flags several specific refinements. It backs further decriminalisation of procedural lapses and reiterates that criminal action should be reserved for fraud and other serious violations. It recommends additional compliance relief for One Person Companies, small companies, producer companies and startups. It supports the trust-to-LLP conversion framework, subject to the safeguards mentioned above, and it calls for continued emphasis on technology-driven governance — digital processes and electronic communication — alongside a stronger role for NFRA.

Since the JPC's report only modifies the Bill and does not itself become law, the next step is for the government to move the Bill, as revised, for passage in both Houses of Parliament. Only after Presidential assent and notification in the Official Gazette will these provisions take legal effect, and even then, several changes are contingent on rules that the Ministry of Corporate Affairs is yet to draft.

Practical Implications for Businesses

Listed companies are likely to feel the compliance-tightening side of the Bill most directly — wider NFRA powers, mandatory auditor registration for prescribed classes, and restrictions on outgoing auditors providing non-audit services are all aimed primarily at entities with a broader shareholder base. Mid-sized and smaller companies, on the other hand, stand to gain the most from the relief measures: higher small-company thresholds, a higher CSR trigger, and decriminalisation of routine defaults should meaningfully cut down both compliance cost and litigation exposure for businesses that were previously just above the older cut-offs.

For foreign investors and multinational groups with Indian subsidiaries, the combination of a lower merger-approval threshold and the new fit-and-proper requirement for directors deserves early attention — particularly where nominee directors sit on Indian boards. For professionals in valuation and audit practice, the consolidation of oversight under IBBI and the expansion of NFRA's mandate are the two developments worth tracking most closely over the coming months.

Practical Challenges Ahead

A Bill of this scale rarely translates into practice without friction. Three challenges stand out. First, much of the actual relief and much of the actual tightening depends on subordinate rules that have not yet been framed — the 'prescribed classes' and 'prescribed conditions' language recurs throughout the Bill, and until rules are notified, companies cannot be fully certain where they will land. Second, the shift of a defined set of offences to civil adjudication will require the Ministry of Corporate Affairs to build out adjudicating capacity and a functioning in-house mechanism at scale, something that has had mixed results in earlier decriminalisation rounds. Third, the CSR threshold revision will likely need close monitoring to see whether it genuinely reduces disproportionate burden on marginal companies without materially denting aggregate CSR spending, a concern the JPC itself appears to have taken seriously.

Compliance Checklist: Getting Ready Before Enactment

Conclusion

The Corporate Laws (Amendment) Bill, 2026 reflects a fairly coherent regulatory philosophy — treat routine, low-risk procedural lapses with proportion, and reserve the sharpest scrutiny for the points in the corporate lifecycle where governance failures actually hurt stakeholders: audits, valuations and board decision-making. Whether that balance holds up in practice will depend heavily on the rules that follow, and on how quickly the promised in-house adjudication mechanism and the IBBI's expanded valuation mandate are operationalised.

For now, with the JPC report tabled and the Bill awaiting final passage, businesses have a useful window to get ahead of the changes — reviewing board composition against the proposed fit-and-proper standard, tightening related-party transaction approvals, and recalibrating CSR and small-company classifications once the government notifies the final thresholds. Taxflash will track the Bill through its remaining legislative stages and update this analysis once it receives Presidential assent.

Frequently Asked Questions

Has the Corporate Laws (Amendment) Bill, 2026 become law? No. As of early August 2026, the Bill has cleared Joint Parliamentary Committee scrutiny, but it still needs to be passed by both Houses of Parliament, receive Presidential assent, and be notified in the Official Gazette before it takes effect.

Which laws does the Bill amend? It amends the Companies Act, 2013 and the Limited Liability Partnership Act, 2008.

Does the Bill remove criminal liability for all corporate offences? No. It decriminalises a defined set of procedural offences and shifts them to civil penalties. Offences involving fraud or serious violations continue to attract criminal action.

How does the Bill affect registered valuers? It designates the IBBI as the Valuation Authority, consolidating registration, recognition and standard-setting for valuers under one regulator.

Will the revised CSR threshold reduce CSR obligations for all companies? It raises the net-profit trigger from Rs 5 crore to Rs 10 crore and allows prescribed exemptions, which would reduce the number of companies covered, though the exact scope depends on rules yet to be notified.

This article has been prepared by the Taxflash Editorial Team solely for educational and informational purposes. While every effort has been made to ensure the accuracy of the information, readers are advised to refer to the relevant provisions of applicable laws, rules, notifications, circulars, judicial pronouncements, and official government publications before taking any decision. The contents of this article should not be construed as professional legal, tax, or financial advice. Taxflash Editorial Team shall not be responsible for any loss or liability arising from reliance on the information contained herein.