NOTE ON THE CORPORATE LAWS (AMENDMENT) BILL, 2026

NOTE ON THE

CORPORATE LAWS (AMENDMENT) BILL, 2026

Further to amend the LLP Act, 2008 and the Companies Act, 2013

At a Glance

1.  What Is This Bill About?

India has two main laws that govern how businesses are set up and run — the Limited Liability Partnership Act, 2008 and the Companies Act, 2013. This Bill proposes changes to both, following the Company Law Committee report of March 2022, stakeholder consultations, and recommendations of the High-Level Committee on Non-Financial Regulatory Reforms (HLC-NFRR).

In plain terms, the Bill does five things:

•     Makes it easier and less risky to run a business — fewer rules that can land you in jail for paperwork errors.

•     Gives small businesses, start-ups, and producer companies more breathing room on compliance.

•     Recognises new ways of doing business — like holding meetings over video calls, or paying employees in stock appreciation rights.

•     Builds a stronger institutional foundation for auditor oversight (NFRA) and valuation regulation (IBBI).

•     Creates clear rules for companies and LLPs operating out of India's International Financial Services Centres (GIFT City), including allowing them to work in foreign currencies.

2.  Changes to the Companies Act, 2013

The Companies Act amendments bill span 90 clauses across virtually every major chapter of the Act. They are grouped below by theme. The Amendment Bill introduces transformative changes to the Companies Act, 2013, focusing on digital modernization, global integration for IFSC entities, and easing the compliance burden through decriminalization.

2.1 Definitions and Small Company Thresholds

•     Small company thresholds increased [Sec 2(85)]: The paid-up capital ceiling raised from Rs. 10 crore to Rs. 20 crore; turnover ceiling from Rs. 100 crore to Rs. 200 crore. Many more companies will now qualify for lighter compliance requirements.

2.2 Incorporation, Digital Presence and Service of Documents

•     Section 7 (Incorporation of Company): Professional declaration at incorporation made conditional — required only when a professional is actually engaged. Director's declaration always required.

•     Section 12A (New): Prescribed classes of companies (expected: listed and unlisted companies meeting the threshold) must maintain a website and an official e-mail address and other modes of communication in a prescribed form and manner. The details of these communication modes, as well as any changes made to them, must be intimated to the Registrar within the form and time period prescribed.

•     Section (Service of Documents) : Electronic service becomes the default for certain companies and document types. Members who want a physical copy can request one and pay for it.

2.3 Securities, Private Placement and Buy-backs

2.4 General Meetings

Online and hybrid AGMs and EGMs are now a permanent statutory feature of Indian corporate life — not a pandemic-era exception.

•     Section 96 (AGM): Companies may hold AGMs in-person, online, or hybrid. If the requisite shareholders ask for hybrid, the company must provide it. Every company must still hold at least one fully in-person AGM once every three years.

•     Section 100 (EGM): Same hybrid flexibility extended to EGMs.

•     Section 101: EGMs held entirely via video conferencing need only 7 days' notice (vs. 21 days for in-person meetings).

•     Section 99 (Penalty): Missing an AGM is now a civil penalty of Rs. 1 lakh + Rs. 5,000/day (capped at Rs. 2 lakh for company; Rs. 50,000 for officers).

2.5 Investor Education and Protection Fund

•     Section 124 (Unpaid Dividend Account): Transfer of Unclaimed Dividends When shares are transferred to the IEPF because dividends have been unclaimed for 7 years, any unpaid or unclaimed dividends on those shares must also be transferred.

•     Section 125 (Investor Education and Protection Fund): Buy-back amounts unclaimed for 7+ years added to IEPF credits. IEPF Authority empowered to delegate its functions by notification. Refund application process simplified.

2.6 National Financial Reporting Authority — NFRA

This is arguably the most structurally important change in the entire Bill. NFRA transitions from a regulatory body that depends on Central Government rules to a genuinely independent regulator — similar in standing to SEBI for the securities market.

Section 132 — Strengthening NFRA's Core:

•     Body Corporate Status: NFRA made a body corporate — perpetual succession, common seal, power to sue and be sued, own property, sign contracts.

•     Disciplinary toolkit expanded: NFRA can now issue advisories, censures, and warnings, require additional training, and refer matters to the Central Government — not just impose penalties and debar.

•     Broader Misconduct: Professional misconduct broadened to include contraventions of the Companies Act within NFRA's remit.

•     Non-compliance with NFRA orders for 90 days risks criminal prosecution on top of the original penalty.

•     Expert Engagement: NFRA is empowered to engage experts and professionals in accounting, auditing, law, and economics to assist in its functions

New Sections 132A–132K — NFRA's Institutional Infrastructure:

•     132A: Auditors of large companies must register with NFRA and file annual returns. Non-compliance: up to Rs. 25 lakh; false statements: up to Rs. 50 lakh.

•     132B: Dedicated NFRA Fund constituted from government grants, fees, and other receipts.

•     132C: NFRA can give binding directions to auditors in public interest. Non-compliance: up to Rs. 1 crore (firms).

•     132D: NFRA can hold inquiries, impose penalties recoverable as land revenue arrears; appeals to NCLAT within 45 days.

•     132E–132F: Civil courts barred from NFRA matters; good-faith immunity for all NFRA officials.

•     132G–132H: Central Government may give policy directions; may supersede NFRA for up to 6 months in emergencies (Parliament to be informed).

•     132-I to 132K: NFRA can levy fees, make its own regulations (laid before Parliament), with mandatory public consultation before issuing regulations.

2.7 Board’s Report (Section-134)

•     Board's report must now include the Board's response to every adverse audit observation, and details of any Audit Committee recommendation rejected — with reasons. Shareholders can now see whether the Board has overruled its auditors or Audit Committee.

•     Details regarding the composition of the Audit Committee must be explicitly stated.

2.8 Corporate Social Responsibility (Section-135)

•     Increased Net Profit Threshold: The threshold of net profit for mandatory CSR compliance has been increased from ₹5 crore to ₹10 crore.

•     Transfer of Unspent Funds: The timeline for transferring unspent CSR funds (relating to ongoing projects) to a separate bank account has been extended from 30 days to 90 days from the end of the financial year.

•     CSR Committee: CSR Committee threshold raised from Rs. 50 lakhs to Rs. 1 crore.

•     Class-Based Exemptions: Central Government can now exempt prescribed classes of companies entirely from Section 135.

2.9 Major Audit Reforms

•     Section 139(12) (Appointment of Auditors): Prescribed classes of very small companies may be exempt from appointing a statutory auditor — significant cost relief.

•     Section 141 (Eligibility, qualifications and disqualifications of auditors): Every partner of an audit firm must be registered with a statutory Indian institute — enabling multi-disciplinary partnerships while ensuring professional qualifications.

•     Section 144 (Auditor not to render certain services): For prescribed company classes, auditors face an absolute prohibition on non-audit services — not just a restricted list — and this ban continues for 3 years after the audit term ends.

•     Section 147 (Punishment for contravention): Procedural audit violations decriminalised — civil penalties apply: Rs. 1 lakh (company) and Rs. 25,000 (officer).

•     Section 148 (Cost Audit): Central Government can now prescribe cost accounting standards. Cost audit firms can be appointed by firm name. Penalties restructured and decriminalised.

2.10 Independent Directors (Section – 149)

•     Current Year Inclusion: Independence criteria now cover the current financial year — a mid-year conflict applies immediately, not just from the next year.

•     New active duty [new section 149(6A)].: IDs must continuously ensure they remain eligible throughout their tenure.

•     Professional Firm Restrictions: 10% transaction threshold for legal/consulting firm connections may be lowered by rules — enabling a tighter independence standard.

•     Extended Cooling-Off Restrictions: Three-year cooling-off period after leaving extended to holding, subsidiary, and associate companies.

•     Additional Director Tenure: Time served as additional director counts toward the total tenure as an Independent Director.

2.11 Director Identification, Appointment and Disqualifications

The Bill tightens the requirements for holding and maintaining a valid identification number:

•     Section 152/154 (DIN Lifecycle): A DIN must remain active throughout directorship. New sub-sections create a full DIN framework: periodic verification; deactivation, cancellation, and surrender; re-activation on prescribed conditions. A cancelled DIN creates a board vacancy.

•     Section 161 (Additional Directors): Tenure changed to next general meeting or 3 months, whichever earlier. A person rejected by members cannot be re-appointed by the Board without fresh member approval.

•     Section 164 (Disqualifications - New grounds for disqualification have been added to ensure higher professional standards and diligence):

Ø  Former auditors, secretarial/cost auditors, registered valuers, and insolvency professionals of the company or its group are barred from becoming directors during the current financial year or the three preceding financial years.

Ø  'Fit and proper' test introduced for all directors

Ø  Non-filing disqualification period shortened from 3 to 2 consecutive years.

•     Section 165 (Number of Directorships): Central Government may set a lower directorship cap for specific classes of companies or directors.

•     Section 166 (Duties of Directors): Criminal penalty narrowed to sub-section (5) (personal gain) — all other director duty violations decriminalised: Rs. 5 lakh (listed) / Rs. 2 lakh (others).

•     Section 167 (Vacation of office by Director): Disqualification under Section 164(2) now causes vacation after 6 months (or expiry of tenure, whichever earlier) — replacing the abrupt immediate vacation. Sub-section (2) decriminalised.

2.12 Board Meetings and Governance

•     Section 173 (Meetings of Board): One Person Companies (OPCs), Small companies, and dormant companies need only one Board meeting per calendar year — down from two per year with a 90-day gap.

•     Section 184 (Disclosure of interest by director): Annual re-declaration of director interests removed — disclosure required only when interests first arise or when there is a change.

•     Section 185 (Loan to Director): Loan restriction extended to LLPs in which a director or relative is a partner.

•     Section 189 (New sub-section 5A) (Register of contracts or arrangements in which directors are interested): Civil penalty of Rs. 2 lakh for failure to maintain the register of director contracts.

•     New Section 203A (KMP Resignation): Whole-time KMPs (CEO, CFO, Company Secretary) can formally resign by written notice. Board must inform the Registrar; if it fails, the KMP can file directly. Post-resignation liability for defaults during tenure is preserved.

•     Section 204 (Secretarial Audit): 'Company secretary in practice' replaced with 'secretarial auditor' throughout. Audit firms can now be appointed by firm name — mirroring the financial auditor framework.

2.13 Mergers, Amalgamations and Restructuring

•     Section 230 (Power to compromise or make arrangements with creditors and members): References to IBC liquidators removed — Companies Act compromise proceedings cannot run alongside active IBC liquidation. One NCLT bench of the being the transferee company bench to handle all companies in a merger scheme (no more multi-bench proceedings causing delays).

•     Section 233 (Fast-Track Mergers): Member approval threshold drops from 90% to 75% of shares held by members present and voting. Creditor approval from nine-tenths to three-fourths. Demergers no longer need to be filed with the Official Liquidator.

•     New Section 233A (Legacy Treasury Shares): Companies holding shares in their own name or through trusts from pre-2013 mergers have 3 years to deal with them. If they fail, shares are automatically cancelled (deemed capital reduction). Non-compliance: Rs. 10,000/day penalty.

2.14 Registered Valuers and IBBI as Valuation Authority

Section 247 is comprehensively overhauled. IBBI is formally designated as the 'Valuation Authority' — consolidating a fragmented system under one body responsible for registering valuers, setting standards, and enforcing compliance.

•     IBBI can register and certify valuers and valuers' organisations; set and enforce valuation standards; oversee service quality.

•     Enhanced penalties: suspension or cancellation for up to 10 years; civil penalties up to Rs. 1 crore (organisations) or Rs. 10 lakh (valuers); criminal liability for intentional fraud.

•     Appeals against IBBI valuation orders go to NCLAT. IBBI can make its own regulations on valuation, with Parliamentary oversight.

IBBI was already administering valuers in practice, but without a clear statutory mandate. This change gives it full, formal authority.

2.15 Strike-Off, Winding Up and Registration

•     Section 248 (Striking off the Companies): The Registrar can now initiate the removal of a company’s name from the register if they have reasonable cause to believe:

Ø  the company has not filed financial statements or annual returns that were due for two consecutive financial years preceding the previous financial year

Ø  The company has not made any significant accounting transaction during the preceding two financial years and the current financial year

•     Section 252: Applications filed within 3 years of strike-off shall now be made to the Regional Director (not NCLT) — faster and less expensive.

•     Section 361 (Summary Winding-Up): IBBI-registered insolvency professionals may now be appointed as liquidators, in addition to the Official Liquidator.

•     New Section 365A: Statutory right to appeal Central Government summary winding-up orders to NCLAT within 45 days.

•     Sections 366 and 374: Non-trading companies added as eligible entities to register under the Companies Act. Notarised affidavit requirement replaced with a prescribed declaration.

2.16 Producer Companies

•     Quorum capped at 100 members (Sections 378Y and 378ZA) — preventing impractical quorum requirements for large-member cooperatives.

•     First AGM timing aligned with standard company rules: 9 months from end of first financial year.

•     Section 378Q: Loan default period that triggers director vacation extended from 90 to 180 days.

•     Section 378ZF (Internal Audit): Only required for Producer Companies with turnover exceeding Rs. 5 crore. Auditor may be CA, CMA, or other Board-approved professional.

•     Sections 378ZM and 378ZS: All penalties decriminalised — criminal fines and imprisonment replaced with civil penalties.

2.17 Enforcement, Adjudication and Settlement

•  Section 396 (Registration Offices): Central Government can appoint Regional Directors at Additional, Joint, and Deputy levels; can authorise Assistant Director-rank officers to exercise Registrar/RD powers.

•  Section 441 (Compounding): Regional Director threshold raised from Rs. 25 lakh to Rs. 1 crore — substantially reducing NCLT's workload on smaller cases.

•  Section 446B: OPCs, small companies, start-ups, and Producer Companies — penalty capped at 50% (or lower prescribed %) of the standard penalty.

•  Section 447 (Fraud): Minimum fine threshold raised from Rs. 10 lakh to Rs. 25 lakh; upper tier cap raised to Rs. 1 crore — consequential to the compounding change.

•  Section 454 (Adjudication): Adjudicating officers can now be at Assistant Registrar level; companies/officers can apply suo motu; new Appellate Authority created; courts can direct penalty payment in addition to fine/imprisonment; all penalties credited to Consolidated Fund.

•  New Section 454B (Recovery): Recovery Officer can attach property, bank accounts, and arrest persons — using Income-tax Act machinery — to recover unpaid penalties.

•  New Section 454C (Settlement): Contraventions liable to civil penalty may be settled before an order is passed, before a Specified Authority constituted by the Central Government. Settlement amounts go to Consolidated Fund. No appeal against settlement orders.

•  New Section 454D (Pre-deposit): 10% of penalty must be deposited before any appeal to NCLAT, Regional Director, or Appellate Authority — against orders of NFRA, Valuation Authority, or adjudicating officer.

•  New Section 466A: Central Government can issue clarificatory guidelines and circulars on rules — after expert consultation. Guidelines cannot override formal rules.

•  Section 469: Violating Companies Act rules now attracts civil penalty up to Rs. 5 lakhs + Rs. 5,000/day. Fully decriminalised.

3.  Changes to the LLP Act, 2008

The LLP Act amendments focus on three objectives: enabling IFSC-based LLPs to operate in foreign currency, facilitating Alternative Investment Funds to restructure as LLPs, and decriminalising procedural defaults.

3.1 IFSC LLP Framework

Four new definitions are inserted (Section 2): 'IFSC', 'IFSCA', 'permitted foreign currency', and 'Specified IFSC LLP'. These are the building blocks for every IFSC-related change that follows. Specified IFSC LLPs must: keep their registered office within the IFSC at all times (Section 13); use 'International Financial Services Centre LLP' as part of their name (Section 15); maintain partner contributions in permitted foreign currency (Section 32); keep all books and financial records in that currency (Section 34); and may be required to use foreign currency for document filings — though all fees, fines, and penalties remain payable in Indian Rupees (Section 68).

3.2 AIF and Trust Conversion

Many Alternative Investment Funds are set up as trusts. A new Section 57A allows these trusts to convert into LLPs — giving fund managers greater operational flexibility. Section 58 is replaced entirely to include specified trusts as a fourth category eligible for conversion, alongside firms, private companies, and unlisted public companies. A new Fifth Schedule sets out the full conversion procedure: only trusts whose proposed LLP partners are exclusively the existing trustees are eligible; three-fourths investor consent is required; all assets, liabilities, contracts, and proceedings transfer automatically; the trust is dissolved; and trustees remain personally liable for pre-conversion obligations.

Two related AIF relaxations ease compliance for SEBI/IFSCA-regulated LLPs: changes to the LLP agreement need only be filed annually (not after each change) (Section 23); and partner changes likewise reported annually instead of within 30 days (Section 25).

3.3 Decriminalization & Adjudication Reforms

The Bill shifts several procedural defaults from criminal fines to civil penalties to promote "Ease of Doing Business."

•     Fixed Penalties: Non-compliance with Registrar requisitions (other than summons) now carries a fixed penalty of ₹10,000

•     Civil Adjudication: Offenses related to the maintenance of books and financial disclosures are moved to a civil penalty framework

•     Suo Moto Adjudication: LLPs or partners can now voluntarily apply for the adjudication of penalties

•     Currency for Penalties: While IFSC LLPs operate in foreign currency, all statutory fees and penalties must be paid in Indian Rupees.

3.4 Other Changes

•     Section 11 (Incorporation): Professional certification required only when a professional is actually engaged — not mandatory for all LLPs.

•     Section 33A (New): Companies Act valuation framework (registered valuers under IBBI) applied to LLP valuations.

•     Section 68B (New): Statutory right to appeal Registrar decisions under Sections 12 and 16.

4.  Penalties

The Amendment Bill significantly rationalizes the penalty framework, primarily by replacing criminal fines with civil penalties to promote the "Ease of Doing Business". The following table summarizes the key changes to penalties under the Companies Act, 2013, and the LLP Act, 2008:

5.  Summary Table — Key Amendments at a Glance

6.  The Big Picture — What This Bill Is Really Doing

Looking beyond the individual sections, ten clear themes emerge from the Bill as a whole.

6.1 Moving from Jail to Fine for Business Mistakes

The most consistent thread is decriminalisation. From missed AGMs to late filings to audit paperwork errors — if it is a procedural or technical mistake, it no longer risks criminal prosecution. You pay a civil penalty instead. This does not mean fraud or deliberate wrongdoing is let off — those still attract criminal consequences and the fraud threshold under Section 447 is actually raised. The change is specifically for paperwork and procedural errors.

6.2 Building a Home for Global Finance in India

The IFSC-specific changes — for both LLPs and companies — are about making GIFT City a genuine alternative to Singapore, Dubai, or the Cayman Islands. Allowing foreign currency capital and books, and creating a tailored compliance regime, gives IFSC businesses the tools to operate on global terms.

6.3 Making NFRA a Real Regulator

India's audit scandals exposed how weak auditor oversight was. NFRA was set up in 2018 but lacked the institutional muscle to be effective. Eleven new sections and a comprehensive overhaul of Section 132 give NFRA the legal foundation, its own fund, enforcement powers, and regulation-making authority to do its job properly. This is arguably the most structurally important change in the entire Bill.

6.4 Helping Small Businesses

Doubled small company thresholds, optional auditors for the smallest companies, one Board meeting a year, reduced penalty caps, longer charge registration timelines, a cap on late fees, and producer company relaxations all add up to meaningful relief for smaller businesses.

6.5 Making Meetings Accessible

Online and hybrid AGMs and EGMs are now a permanent, statutory feature of Indian corporate life — not just a pandemic-era exception. With a minimum of one physical AGM every three years, the law balances digital convenience with the importance of face-to-face accountability.

6.6 Raising Board Standards

Stricter independence criteria for IDs, continuous monitoring obligations, a fit and proper test, the DIN lifecycle framework, the bar on former auditors becoming directors, and prevention of re-appointment of rejected directors all point in one direction: boards must be more careful about who sits on them and how they operate.

6.7 One Regulator for Valuations

IBBI's formal designation as the Valuation Authority consolidates a fragmented system. With one body responsible for registering valuers, setting standards, and enforcing compliance, the quality and reliability of valuations in India should improve — benefiting mergers, insolvency proceedings, and investor protection.

6.8 A Better Framework for Investment Funds

The ability to convert trust-form AIFs into LLPs, annual reporting for AIF-LLPs, and IFSC-specific foreign currency rules are all aimed at making India more competitive for alternative investments like private equity and venture capital.

6.9 A Modern Enforcement System

The new recovery mechanism, the settlement window, and the 10% pre-deposit rule together create a mature, multi-layered enforcement pyramid — genuine disputes get adjudicated, serial defaulters cannot delay through endless appeals, and businesses have a realistic way to resolve regulatory problems.

6.10 Cleaner Mergers and Less Corporate Clutter

A single NCLT bench for mergers, easier fast-track thresholds, the IBC clarification, and the forced resolution of legacy treasury shares all contribute to a more efficient corporate restructuring landscape.

7.  Conclusion

The Corporate Laws (Amendment) Bill, 2026 is a wide-ranging but coherent piece of legislation. Its amendments to the LLP Act and Companies Act follow clear themes: decriminalisation, ease of doing business, stronger regulators, better governance, and modernisation for a digital and global economy.

For a business owner, the most immediate impact is far less fear of criminal prosecution for paperwork mistakes. For investors, it means stronger auditor oversight and more transparent boards. For fund managers, it opens new structuring options. For regulators, it is a significant expansion of institutional capacity. For the economy broadly, it signals a maturing, more proportionate framework that is more in tune with how businesses actually operate today.

The Bill builds on years of careful reform and takes Indian corporate law another significant and confident step forward.

The content provided in this document is based on research and is for informational and academic purposes only. It should not be construed as legal advice or advertisement/solicitation.

While every effort has been made to ensure accuracy, discrepancies may still occur.

Readers are therefore advised to cross-verify the information with the original source.