Introduced in Lok Sabha on 18 March 2026 by Finance Minister Nirmala Sitharaman, the Corporate Laws (Amendment) Bill, 2026 is one of the most comprehensive overhauls of Indian corporate law in recent years. With 107 clauses amending the Companies Act, 2013 and the LLP Act, 2008, this Bill touches everything from startup compliance thresholds to fund structures, director disqualifications, and decriminalisation of procedural defaults. This guide breaks down every key change in plain language.
What Is the Corporate Laws (Amendment) Bill, 2026?
The Corporate Laws (Amendment) Bill, 2026 was introduced in Lok Sabha on 18 March 2026 by Finance Minister Nirmala Sitharaman. It proposes to amend two foundational statutes governing Indian businesses: the Companies Act, 2013 and the Limited Liability Partnership (LLP) Act, 2008.
The Bill contains 107 clauses, decriminalises over 20 sections, doubles the small company threshold, and reduces the fast-track merger approval requirement to 75%. It is designed to reduce compliance burden, modernise governance, and create a more business-friendly regulatory environment, particularly for startups, funds, and IFSC/GIFT City entities.
Key headline numbers at a glance:
| Metric | Detail |
| Total clauses | 107 |
| Sections decriminalised | 20+ |
| Small company threshold change | 2x increase |
| Fast-track merger approval | Reduced to 75% |
| Acts amended | Companies Act, 2013 and LLP Act, 2008 |
Important note: The Bill has been introduced but is not yet law. Different provisions will be notified on different dates, and many changes depend on rules that are yet to be prescribed.
Changes for Startups and Small Companies
Small Company Definition Has Been Doubled
The Bill raises the statutory ceiling for qualifying as a “small company” under Section 2(85) of the Companies Act, 2013.
| Parameter | Earlier (S.2(85)) | Proposed |
| Paid-up capital ceiling | Rs. 10 crore | Rs. 20 crore |
| Turnover ceiling | Rs. 100 crore | Rs. 200 crore |
Critical caveat: The currently operative prescribed limits under the Companies (Specification of Definitions Details) Rules remain Rs. 4 crore (paid-up capital) and Rs. 40 crore (turnover). The government must separately amend those rules before higher thresholds apply in practice. Until that rule amendment comes through, nothing changes automatically.
When the rule amendment does come, a significantly larger pool of private companies will qualify for lighter compliance on board meetings, audit requirements, penalties, and CSR obligations.
CSR: Higher Thresholds and More Breathing Room
The Bill raises multiple CSR thresholds under Section 135, giving early-stage and growth-stage startups meaningful relief.
| CSR Parameter | Earlier | Proposed |
| Net profit trigger | Rs. 5 crore | Rs. 10 crore |
| Committee not needed if spend up to | Rs. 50 lakh | Rs. 1 crore |
| Transfer to unspent CSR account | 30 days from FY end | 90 days from FY end |
| Full exemption for a class of companies | Not available | Now possible (to be prescribed) |
Most startups with net profit between Rs. 5 crore and Rs. 10 crore will now fall outside CSR applicability entirely. For those just above the threshold, the compliance burden has been eased with more time and fewer committee requirements.
Statutory Audit Exemption for Small Companies
Section 139 gets a new sub-section (12), which allows a prescribed class of companies to skip appointing a statutory auditor under Chapter X altogether. This provision is aimed at very small companies where the cost of audit exceeds its utility.
Until the rules under Section 139(12) are notified, statutory audit remains mandatory for all companies regardless of size. This is a future benefit, not an immediate one.
Board Meetings Reduced to One Per Year for OPC, Small, and Dormant Companies
Section 173(5) is amended to require only one board meeting per calendar year for One Person Companies (OPCs), small companies, and dormant companies. Earlier, these entities were required to hold one board meeting per half of the calendar year, with at least a 90-day gap between the two.
This cuts the minimum requirement from two meetings to one, reducing procedural overhead for companies that do not need frequent board governance.
Incorporation: Professional Certification Now Optional
Section 7(1)(b) is amended so that the mandatory declaration by a CA, CS, CMA, or advocate at the time of incorporation is now required only if the company actually engaged such professionals in its formation. A declaration by the proposed director alone is sufficient. The same change applies to LLP incorporation under Section 11 of the LLP Act.
This reduces cost and friction for straightforward incorporations, while professional certification remains available when the services were actually used.
AGMs and EGMs: Video Conferencing Is Now Legally Recognised
Sections 96 and 100 are amended to permit companies to hold Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs) wholly or partly through video conferencing or audio-visual means.
Key details:
- One physical AGM is mandatory every three years
- EGMs conducted fully via video conferencing can be called with just 7 days’ notice (versus the usual 21 days)
- Members can requisition hybrid mode
This formalises what most companies have been doing since COVID-19 and provides a significant speed advantage for EGMs, particularly in time-sensitive governance decisions.
RSUs, SARs, and Phantom Stock Formally Recognised
Sections 42, 62, and 68 now reference “schemes linked to the value of share capital” alongside ESOPs and sweat equity. This brings Restricted Stock Units (RSUs), Stock Appreciation Rights (SARs), and similar instruments within the statutory framework for issuance with shareholder approval.
This means founders can now design employee compensation structures beyond plain-vanilla ESOPs with full statutory backing. SEBI is expected to follow with corresponding regulations for listed companies.
Other Changes That Matter for Startups
| Change | Section | What It Means |
| Charge registration: 120 days for small companies | S.77(1) | 60 extra days to file charge forms (was 60, now 120 for prescribed class) |
| Additional filing fees capped at Rs. 2 lakh | S.403(1) | For prescribed class of companies. Prevents runaway late fees. |
| Penalty reduction below 50% for small/startup | S.446B | Government can prescribe a percentage lower than 50% of penalty for OPC, small, startup, and producer companies |
| KMP resignation framework | S.203A (new) | Non-director KMPs (CFO, CS) can resign by notice. Can file directly with Registrar if company does not |
| Company loans/guarantees: LLPs now covered | S.185(1)(b) | A company can no longer advance loans or give guarantees for loans taken by any LLP in which a director or relative is a partner |
| Penalty appeal: 10% deposit required upfront | S.454D (new) | No appeal against NFRA, Valuation Authority, or adjudicating officer penalty orders will be admitted unless the appellant first deposits 10% of the penalty amount |
| Financial year realignment | S.2(41) | Companies can apply to Central Government to shift FY to end 31 March. No Tribunal needed |
Founders using LLPs as personal holding vehicles or investment entities should specifically review their inter-company financial arrangements in light of the changes to Section 185(1)(b).
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Changes for Funds, GIFT City, and IFSC Entities
The Bill creates a proper statutory framework for companies and LLPs operating in IFSC/GIFT City. Until now, these entities were accommodated within the main Companies Act and LLP Act, which created friction on currency denomination, filings, and partner changes.
Share Capital and Books of Account in Foreign Currency
New Section 43A (Companies Act) mandates that IFSC companies must issue and maintain share capital in a permitted foreign currency specified by IFSCA. Books of account, financial statements, and all records must also be maintained in foreign currency. Fees, fines, and penalties remain payable in INR.
Section 32 of the LLP Act receives the same treatment for Specified IFSC LLPs. Partner contributions must be in permitted foreign currency, and existing IFSC entities get a transition window to convert from INR.
This removes the INR conversion overhead for entities that operate entirely in USD or other foreign currencies, enabling cleaner books and cleaner reporting.
AIF Trusts Can Now Convert to LLPs
New Section 57A and the Fifth Schedule of the LLP Act allow a “specified trust” registered with SEBI or IFSCA to convert into an LLP. All assets, liabilities, contracts, and proceedings transfer automatically. The conversion requires consent of 75% of investors.
This enables fund managers running AIFs as trusts to restructure into LLPs for better governance flexibility, clearer ownership, and potentially better tax treatment. This has been a long-standing industry ask.
AIF LLPs: Relaxed Partner Change Filings
Sections 23 and 25 of the LLP Act are amended so that for LLPs regulated by SEBI or IFSCA (i.e., AIFs), changes to the LLP agreement and partner additions or exits need to be reported to the Registrar only on an annual basis. The earlier requirement of filing within 30 days of every change made fund structures impractical given the volume of investor onboarding and exits.
Annual filing aligns with how fund LLPs actually operate and removes a major compliance pain point for AIF managers.
Summary of IFSC and Fund-Related Changes
| IFSC/Fund Change | Act/Section | Key Detail |
| IFSC companies: foreign currency capital | S.43A (new) | Mandatory for new IFSC companies. Transition window for existing |
| IFSC LLPs: foreign currency contribution | S.32, LLP Act | Partner contribution in permitted foreign currency |
| IFSC LLP naming | S.15, LLP Act | Must use suffix “International Financial Services Centre LLP” |
| AIF trust to LLP conversion | S.57A + Fifth Schedule | Full asset/liability transfer. 75% investor consent required |
| AIF LLP: annual partner filings | S.23, 25, LLP Act | Changes filed annually, not within 30 days |
| Valuation: Companies Act S.247 applies to LLPs | S.33A (new), LLP Act | Registered valuers required for LLP valuations |
Governance and Compliance Changes
Decriminalisation: Criminal to Civil, Across the Board
The single biggest theme of the Bill is decriminalisation. Over 20 sections across the Companies Act and LLP Act have been amended to replace criminal penalties (imprisonment plus fine) with civil penalties (monetary only, adjudicated by officers, not courts). This continues the reform trend from the 2019 and 2020 amendments.
New mechanisms have been introduced to support this shift:
| Mechanism | Section | What It Does |
| Settlement | S.454C (new) | Apply before the penalty order is passed. Once an order is made, the settlement window closes permanently. No appeal lies against a settlement order under S.454C(8) |
| Recovery Officer | S.454B (new) | If penalty is unpaid, Recovery Officer can attach bank accounts, movable/immovable property, and even arrest. Powers mirror Income Tax recovery provisions |
| Suo moto adjudication | S.454(1A), S.76A(1A) | Companies can apply for penalty adjudication themselves, incentivising voluntary compliance |
| Pending criminal cases | S.454(10), S.76A(10) | Government to notify a scheme for withdrawal and transfer of pending criminal complaints to civil adjudication |
Directors and officers now face monetary penalties rather than jail time for procedural defaults. However, the Recovery Officer mechanism means that non-payment of penalties is no longer consequence-free.
Directors: Tighter Rules on Independence and Disqualification
The Bill tightens the rules governing who can serve as a director and how they maintain their qualification.
| Director Change | Section | Detail |
| DIN deactivation/cancellation | S.154(2)-(7) | DIN can be deactivated for KYC non-compliance, disqualification under S.164, or Tribunal order. A director cannot function with a deactivated DIN |
| Disqualification: non-filing period shortened | S.164(2)(a) | Reduced from 3 consecutive years to 2 consecutive years of not filing financials or annual returns |
| Auditors, valuers, IPs cannot be directors | S.164(1)(j) (new) | If you have been auditor, cost auditor, secretarial auditor, registered valuer, or insolvency professional of the company (or its holding/subsidiary/associate) in the preceding 3 years, you are disqualified from directorship |
| Fit and proper test | S.164(1)(k) (new) | Board must assess each director as “fit and proper” per criteria to be prescribed. Different criteria can apply to different classes of companies |
| Independent director: cooling-off expanded | S.149(11) | 3-year cooling-off now applies to holding, subsidiary, and associate companies, not just the company where you served |
| Additional director tenure counts | S.149, Expl. 2 | Period served as additional director is included in independent director tenure calculation |
| RPT penalty: disqualification trigger expanded | S.164(1)(g) | A civil penalty order for an RPT default under S.188 now triggers director disqualification. Previously required a court conviction |
| Disqualification: 6-month grace before vacation of office | S.167(1)(a) | Director now has 6 months from the date of default (or tenure expiry, whichever is earlier) before office becomes vacant. For a founder on multiple boards, this is a meaningful window to fix the default |
| Additional/casual vacancy directors: 3-month cap | S.161(1),(4) | Hold office up to next general meeting or 3 months, whichever is earlier |
Mergers and Amalgamations: Faster and Simpler
Three key changes make corporate restructuring significantly easier:
Single NCLT bench: All scheme applications under Sections 230 to 233 must now be filed with the Tribunal having jurisdiction over the transferee company. One bench handles the entire scheme for all companies involved, eliminating parallel applications in different benches and the jurisdictional delays they cause.
Lower fast-track merger approval threshold: Under Section 233, the member approval requirement drops from 90% of total shares to 75% of shares held by members present and voting. Creditor approval drops from 9/10th to 3/4th in value. This aligns with Section 230 scheme approval requirements and reduces holdout problems.
Official Liquidator filing removed for demergers: The copy of scheme no longer needs to be filed with the Official Liquidator if the scheme is a transfer or division of undertaking.
NFRA: Body Corporate Status and Broader Enforcement Powers
The National Financial Reporting Authority (NFRA) receives a full statutory upgrade under this Bill:
- It becomes a body corporate with perpetual succession (S.132(1A))
- It gets its own fund (S.132B), regulation-making power (S.132J), and the ability to hire experts (S.132(17))
- New enforcement tools include advisory/censure/warning to auditors, mandatory additional training, and referral to Central Government
- Penalties for non-compliance: up to Rs. 50 lakh for individuals and Rs. 1 crore for firms
- Auditors of prescribed companies must now register with NFRA and file returns (S.132A)
- Non-compliance with NFRA orders can lead to imprisonment of up to 6 months
NFRA effectively moves from a quasi-regulator to a full-fledged statutory body, and auditors and audit firms face a meaningfully stronger oversight regime.
Valuation: IBBI Becomes the Valuation Authority
Section 247 has been overhauled. The Insolvency and Bankruptcy Board of India (IBBI) is now designated as the Valuation Authority. Its new powers include:
- Granting and renewing certificates of recognition to valuers’ organisations
- Registering individual valuers
- Recommending valuation standards
- Inspecting and investigating valuers and organisations
Penalties are up to Rs. 10 lakh for registered valuers and Rs. 1 crore for organisations. Fraud by a valuer can attract imprisonment of up to 1 year plus a fine of up to Rs. 25 lakh. Appeals go to NCLAT.
Companies must ensure that their valuers hold valid IBBI-issued registrations going forward.
Voluntary Strike-Off: Broader and Simpler
Section 248 is amended to expand the grounds for strike-off to include companies that have not filed financial statements or annual returns for two consecutive years, or have not made significant accounting transactions for two years. Applications under Section 248(2) no longer need to cite specific grounds from Section 248(1).
Section 252 is also amended so that restoration applications now go to the Regional Director instead of NCLT. Dormant companies under Section 455 must now apply for dormant status (previously optional). The inactive company definition is also clarified.
The net effect is that it becomes easier to both close and restore a company, and the Regional Director route avoids NCLT queues entirely.
Other Governance Changes Worth Noting
| Change | Section | Detail |
| Auditor non-audit services: 3-year cooling-off | S.144 | Auditor or firm cannot provide non-audit services for 3 years after completing audit term. Prescribed class may face a full ban |
| Board report: auditor observations mandatory | S.134(3)(fa) | Board must explain or comment on every adverse auditor observation. Audit committee composition must also be disclosed |
| Trust as beneficial owner | S.88(2A) | No notice of trust to be entered in register of members. Trust registered as beneficial owner; trustee as member |
| Compounding threshold raised | S.441 | Regional Director can compound offences with fine up to Rs. 1 crore (was Rs. 25 lakh). Reduces NCLT burden |
| Fraud threshold raised | S.447 | Minimum fraud amount for imprisonment: Rs. 25 lakh (was Rs. 10 lakh). Non-public interest fraud cap: Rs. 1 crore (was Rs. 50 lakh) |
| Special NCLT benches | S.419(4A) | President can constitute special benches for specific cases under Companies Act or IBC |
| Non-trading entities: registration as companies | S.366, 374 | Non-trading entities (including those registered with State Governments) can now register as companies under Part I of Chapter XXI |
| Disclosure: only when changed | S.184(1) | Directors no longer need to disclose interests at the first board meeting every FY. Only required when there is a change |
| Electronic service of documents | S.20(2) | Prescribed companies must serve documents to members only via electronic mode |
| Website mandatory for prescribed companies | S.12A (new) | Prescribed class of companies must maintain a website, email, and communication modes. Details to be filed with Registrar |
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What Should You Do Now?
The Bill is introduced but not yet law. Different provisions will be notified on different dates, and many of the most significant changes (such as the small company audit exemption and the expanded small company definition) depend on rules that are yet to be prescribed.
Key things to watch for:
- Amendment to the Companies (Specification of Definitions Details) Rules for the small company threshold to take practical effect
- Notification under Section 139(12) prescribing which companies are exempt from statutory audit
- Rules prescribing the “fit and proper” criteria for directors under Section 164(1)(k)
- IBBI regulations for the new valuation registration regime
- Government scheme for withdrawal and transfer of pending criminal complaints under Sections 454(10) and 76A(10)
Founders on multiple boards, promoter-directors with pending or potential RPT defaults, AIF managers using trust structures, and companies with LLP-related inter-company financial arrangements should seek legal review of their specific situations now, ahead of the rules being notified.
Disclaimer:
This note is for informational purposes only and does not constitute legal or professional advice. Positions in the Bill are subject to change and may vary based on individual circumstances. Consult your advisor before acting on any of the above. If you spot a discrepancy or would like to flag something, write to us at