Corporate Laws (Amendment) Bill 2026: India Decriminalizes – Business Offences

Bill No.: 85 of 2026 Introduced in: Lok Sabha, 23 March 2026

Introduced by: Finance Minister Nirmala Sitharaman

Status: Referred to Joint Parliamentary Committee (JPC)

Acts Amended: Companies Act, 2013 | Limited Liability Partnership Act, 2008

Introduction

India’s corporate regulatory landscape is undergoing a significant transformation. The Corporate Laws (Amendment) Bill, 2026, introduced in the Lok Sabha on 23 March 2026, proposes wide-ranging reforms to two foundational statutes — the Companies Act, 2013 and the Limited Liability Partnership (LLP) Act, 2008.

The Bill is driven by recommendations from the Company Law Committee (2022) and the High-Level Committee on Non-Financial Regulatory Reforms. Its central objective is to reduce procedural bottlenecks, strengthen corporate governance, and position India as a globally competitive destination for business and investment.

Following its introduction, the Bill was referred to a Joint Parliamentary Committee for clause-by-clause examination. Stakeholder consultations and expert testimony will shape its final form before it is presented for parliamentary approval.

1. Decriminalisation of Offences

One of the most consequential reforms in the Bill is the systematic replacement of criminal liability with civil penalties for procedural defaults.

Offences decriminalised under the Companies Act, 2013 include:

Wilful failure to furnish information relating to the affairs of a producer company
Contravention of prescribed rules
Failure to furnish information or documents required by the Registrar
Violation of requirements relating to books of account
Non-compliance with a requisition (other than summons) issued by the Registrar

Offences decriminalised under the LLP Act, 2008 include:

Non-compliance with AGM requirements now attracts a monetary penalty instead of criminal prosecution
Failure to comply with Registrar requisitions — now subject to a fixed penalty of ₹10,000

This shift from prosecution to penalty marks a decisive move away from the “Inspector Raj” model of compliance enforcement.

2. Corporate Social Responsibility (CSR) — Revised Thresholds

The Bill recalibrates the net profit threshold that triggers mandatory CSR obligations.

Current position under the Companies Act, 2013: A company meeting any of the following thresholds must contribute at least 2% of its average net profit towards CSR:

Net worth of ₹500 crore or more
Turnover of ₹1,000 crore or more
Net profit of ₹5 crore or more

Proposed amendment:

The net profit threshold is revised upward to ₹10 crore (or such other sum as may be prescribed)
Companies fulfilling prescribed conditions will be fully exempt from CSR compliance obligations

This amendment offers meaningful relief to small and mid-sized enterprises whose profitability has grown incrementally but whose compliance costs have risen disproportionately.

3. Digital-First Compliance Framework

The Bill introduces a structured shift towards electronic governance in corporate operations.

Key digital reforms include:

Prescribed classes of companies are required to serve specified documents to members exclusively through electronic mode
Electronic delivery is deemed to constitute valid legal compliance under the Act
Members may request physical copies of documents, subject to a fee approved at a general meeting
Companies must maintain websites, email addresses, and electronic communication systems, with mandatory reporting of such details to the Registrar

4. Annual General Meetings (AGMs) — Flexible Format

The Bill formally recognises virtual and hybrid meeting formats.

Revised AGM framework:

Companies may hold AGMs physically, through video conferencing, or through other audio-visual means
A physical meeting must be held at least once every three years
An electronic notice with a reduced notice period is permitted in specified circumstances

This provision codifies pandemic-era practices and aligns Indian corporate law with international norms.

5. Small Company Threshold — Enhanced Limits

Revised limits under Section 2(85):

Parameter	Current Limit	Proposed Limit
Paid-up Share Capital	Up to ₹10 crore	Up to ₹20 crore
Turnover	Up to ₹100 crore	Up to ₹200 crore

A wider definition of “small company” translates into reduced compliance obligations for a significantly larger pool of businesses.

6. Employee Compensation Schemes — Formal Recognition

The Bill expands the scope of permissible employee compensation instruments.

New schemes recognised under Section 62:

Restricted Stock Units (RSUs): Employees receive shares upon vesting, subject to conditions of service
Stock Appreciation Rights (SARs): Employees receive a cash payment equivalent to the appreciation in share value over a defined period

This reform brings Indian compensation law in line with global practice and is particularly significant for start-ups and technology companies seeking to attract and retain talent.

7. Corporate Governance — Strengthened Standards

The Bill introduces a series of governance-centric reforms aimed at reducing conflicts of interest and improving board accountability.

Key governance reforms include:

Director fit and proper criteria [Section 164]: Boards are required to assess and ensure that every director meets the prescribed fit and proper standards
Related party default disqualification [Section 164]: A person penalised for defaults in related party transactions under Section 188 is disqualified from holding a directorship
Restrictions on non-audit services [Section 144]: Prescribed classes of auditors are prohibited from providing non-audit services to the company or its holding and subsidiary companies for three years following the conclusion of their audit tenure
KMP resignation process [Section 203A]: A formal and transparent procedure is established for the resignation of whole-time Key Managerial Personnel who are not directors
Board report disclosures: Additional disclosures are mandated in board reports, including explanations for audit observations and details of audit committee recommendations

8. National Financial Reporting Authority (NFRA) — Enhanced Powers

The Bill significantly strengthens the oversight capabilities of NFRA.

Expanded powers include:

Authority to specify regulations on the manner of investigation
Power to issue advisory notices, censures, and warnings
Ability to engage domain experts to support oversight and standard-setting functions

These enhancements position NFRA as a more proactive regulator of accounting and auditing standards in India.

9. Valuation Authority — IBBI Designated

The Bill designates the Insolvency and Bankruptcy Board of India (IBBI) as the national Valuation Authority.

IBBI’s new responsibilities include:

Granting certificates of registration and recognition to registered valuers
Making recommendations to the Central Government on valuation standards
Ensuring compliance with valuation norms

Centralising valuation oversight under IBBI is expected to bring greater consistency and credibility to corporate valuations across insolvency, mergers, and transactions.

10. IFSC-Specific Reforms — LLP Framework

The Bill introduces a dedicated regulatory framework for LLPs operating within International Financial Services Centres (IFSCs).

Key IFSC reforms include:

Introduction of the concept of “Specified International Financial Services Centre LLP”
New definitions for “International Financial Services Centre,” “IFSC Authority,” and “permitted foreign currency”
LLPs in IFSCs are permitted to maintain accounts, contributions, and financial records in permitted foreign currencies
Conversion of existing contributions from Indian Rupees to foreign currency is permitted within a prescribed framework
Fees, fines, and penalties remain payable in Indian Rupees

11. Conversion of Trusts into LLPs

The Bill introduces a new structural pathway for specified trusts to convert into LLPs.

Eligibility conditions for conversion:

The trust must be established under the Indian Trusts Act, 1882 or any other central or state legislation
The trust must be registered with SEBI or IFSCA
The trust must be engaged in prescribed activities
Only trustees of the trust may become partners of the resulting LLP

Legal consequences of conversion:

All tangible and intangible assets, liabilities, rights, and obligations of the trust vest in the LLP upon registration
The trust is deemed dissolved from the date of registration
Existing agreements, legal proceedings, and employment arrangements continue seamlessly in the LLP

12. Auditor Independence and Appointment

Prescribed classes of companies are exempt from the mandatory requirement to appoint an auditor, subject to the fulfilment of prescribed conditions
Certain affidavits are replaced with self-declarations, reducing procedural formalities
Restrictions on non-audit services strengthen auditor independence and reduce conflicts of interest

Current Status and What Lies Ahead

The Bill has been referred to a Joint Parliamentary Committee for detailed examination. The JPC referral indicates a more thorough legislative scrutiny process, with inputs expected on compliance simplification, penalty rationalisation, and improvements to the overall corporate regulatory framework.

Businesses, legal professionals, and compliance teams are advised to monitor JPC proceedings closely and begin assessing potential adjustments to internal policies and governance frameworks in anticipation of the Bill’s enactment.

Conclusion

The Corporate Laws (Amendment) Bill, 2026, is not merely a set of technical amendments. It represents a deliberate policy shift — from an enforcement-heavy model towards a compliance-facilitative framework that is digital, proportionate, and globally oriented.

For Indian businesses, the message is clear: the regulatory environment is evolving. Those who adapt early will be best positioned to benefit.

Disclaimer: This article is prepared for informational and academic purposes only. It does not constitute legal advice. Readers are advised to consult a qualified legal or compliance professional before acting on the provisions discussed herein.