The Corporate Laws Bill, 2026: A New Era for Indian Business Regulation

INTRODUCTION

The Union Minister of Finance and Corporate Affairs has introduced the Corporate Laws (Amendment) Bill, 2026 on 23rd March 2026, proposing a wide range of amendments to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. The amendments are aimed at improving the ease of doing business in India, lowering the compliance burden, and strengthening corporate governance.

The Bill has currently been referred to a Joint Parliamentary Committee (JPC) for detailed scrutiny. This process allows various stakeholders to present their concerns and suggestions, following which the Committee will submit its recommendations to Parliament for further consideration.

The Bill represents the most significant proposed amendment since the Amendment of 2020, as it introduces a wide range of reforms, including the decriminalisation of various offences, changes in Corporate Social Responsibility (CSR) thresholds, measures for the simplification of compliance requirements, expansion of the small company framework, and recognition of broader employee compensation instruments beyond traditional ESOPs.

THE SALIENT FEATURES OF THE BILL

1. Decriminalisation

One of the most discussed features of the Bill is the decriminalisation of over 20 offences under the Companies Act. The Bill converts criminal penalties into civil monetary penalties.

It replaces criminal penalties applicable to failure to furnish information required by the Registrar, contravention of rules under various sections, violations related to the maintenance of books of account, and failure to comply with producer company requirements with fixed monetary penalties. The Bill also proposes to revise the threshold for “lesser fraud” as defined under the Act. While the existing law treats fraud below ₹10 lakh as a lesser offence, the Bill increases this threshold so that a wider range of low-value fraud cases falls under reduced penalty provisions.

2. Small Companies

Under the Act, a small company is defined as one having a paid-up share capital not exceeding ₹50 lakh, or such higher prescribed amount as may be notified, up to a maximum of ₹10 crore, and a turnover not exceeding ₹2 crore, or such higher prescribed amount as may be notified, up to a maximum of ₹100 crore.

However, the Bill proposes to further expand this threshold by raising the maximum paid-up share capital to ₹20 crore and the turnover threshold to ₹200 crore, thereby enabling a larger number of companies to qualify as small companies and benefit from reduced compliance requirements.

3. CSR Obligations

The Bill proposes to amend the Corporate Social Responsibility (CSR) provisions in the Companies Act, 2013 by increasing the net profit threshold for triggering CSR obligations from ₹5 crore to ₹10 crore. This move will exclude many mid-sized companies from mandatory CSR obligations.

The time limit for transferring unspent CSR funds for ongoing projects is proposed to be extended from 30 days to 90 days, providing operational relief. The threshold for constituting a CSR Committee is raised from ₹50 lakh to ₹1 crore, reducing governance requirements. The Bill also empowers the Central Government to exempt certain classes of companies from CSR obligations.

4. Directors and Board Governance

The Bill proposes key changes to directors and board governance under the Act. It extends independence checks to the current financial year and allows stricter thresholds for firm relationships. Independent Directors (IDs) must now ensure continuous compliance throughout their tenure.

Further, for the first time, the Bill introduces a “fit and proper person” test for directors, with criteria to be prescribed by the Central Government.

The Bill also seeks to limit the tenure of additional and casual vacancy directors to three months or until the next general meeting, whichever is earlier. Additional directors shall not be permitted to continue beyond this period without shareholder approval. Further, the Board shall not be permitted to appoint a person as an additional, alternate, or casual vacancy director if they have been previously rejected by shareholders, unless prior approval has been obtained.

The Bill disqualifies individuals from acting as directors if they have served as auditors, secretarial auditors, cost auditors, registered valuers, or insolvency professionals for the company, its holding company, subsidiary, or associate during the preceding three years or the current financial year.

The period for disqualification due to non-filing of financial statements or annual returns is reduced from three years to two years. The Bill also intends to replace annual blanket disclosures with an event-based disclosure system for directors’ interests.

A formal framework has been created for KMP resignations, whereby the Board is required to notify the Registrar of Companies about the resignation. If the Board fails to do so, the KMP may directly notify the RoC and include the reasons for resignation.

5. Statutory Meetings and Digital Governance

The Bill proposes to allow companies to hold AGMs and EGMs in physical, virtual, or hybrid mode, thereby establishing a statutory framework for digital and flexible meetings. Under the Bill, companies shall be required to hold at least one physical AGM every three years.

Extraordinary General Meetings (EGMs) can now be conducted fully virtually, provided a reduced notice period of 7 days (from 21 days) is given. This hybrid model allows participation both physically and through digital platforms.

6. Fast-Track Mergers, Amalgamation and Restructuring

The Bill introduces significant changes to the merger and amalgamation framework under the Act, aiming to simplify approval procedures and reduce reliance on multiple tribunals. It reduces the member approval threshold from 90% to 75% of the value held by members present and voting, and creditor approval from 9/10 to 3/4 in value.

It also removes the requirement of filing with the Official Liquidator for demergers or transfers of undertakings, eliminating procedural delays. Further, the Bill removes the need for multiple NCLT approvals in cross-jurisdictional mergers, allowing only the transferee company’s Tribunal to have jurisdiction.

7. Buyback and Capital Restructuring

The Bill introduces flexibility in capital structure and employee compensation. Under the Act, a company may purchase its own shares or other specified securities; however, it must not exceed 25% of the aggregate of paid-up capital and free reserves. The Bill introduces prescribed classes of companies for which buyback may be permitted up to a higher prescribed percentage.

Further, debt-free companies can now undertake two buybacks in a year with a six-month gap instead of one year. Apart from Employee Stock Option Plans (ESOPs), the Bill also recognises other schemes linked to the value of the share capital of a company, such as Restricted Stock Units (RSUs) and Stock Appreciation Rights (SARs).

8. Audit

The Bill introduces provisions allowing prescribed classes of companies—likely small companies meeting certain thresholds—to be exempted from mandatory auditor appointment. It also restricts auditors from providing non-audit services to the company and its group entities. This restriction continues for three years even after the auditor’s tenure ends.

9. NFRA

The Bill proposes to strengthen the National Financial Reporting Authority (NFRA) by making it an independent statutory body corporate with its own legal personality. It can issue advisories, warnings, and censures, and mandate professional training. It may impose penalties and refer matters to the Central Government for further action.

Auditors must intimate their ICAI registration details to NFRA within a prescribed timeframe and file documents, returns, and information as specified. Failure to comply with these requirements may lead to significant penalties.

CONCLUSION

The Bill marks a significant step in the evolution of India’s corporate legal framework. By striking a balance between ease of doing business and robust corporate governance, it reflects a shift towards a more flexible, transparent, and globally aligned regulatory regime.