Corporate Laws Amendment Bill, 2026 introduced in Lok Sabha; major decriminalization and ease of doing business changes proposed

The Central Government has introduced the Corporate Laws Amendment Bill, 2026 (“Bill”) in the Lok Sabha to amend the Companies Act, 2013 (“Companies Act”) and the Limited Liability Partnership Act, 2008 (“LLP Act”). The Bill seeks to improve ease of doing business, easing compliance for smaller entities, and aligning corporate regulation with evolving business practices.

1. The Bill proposes the following changes:
   • Decriminalise and rationalise penalties for several defaults:
   • Converts multiple fine‑based offences into civil penalties under the Companies Act and LLP Act, particularly for procedural lapses such as delays in filings, prospectus‑related contraventions and certain non‑compliances with corporate processes.
   • Enhances and restructures the adjudication framework under section 454 by empowering Assistant Registrars as adjudicating officers, introducing an appellate authority (not below Joint Director rank), and providing for recovery of unpaid penalties through attachment, sale of property, bank account attachment and other recovery modes aligned with income‑tax recovery machinery.
   • Introduces a settlement mechanism for specified contraventions, permitting applicants to approach a Specified Authority for settlement on prescribed terms, with detailed rule‑making powers to govern process, timelines, and monitoring of settlements.
2. Ease of compliance for small, OPC, start‑up producer companies: 
   • Expands the definition of “small company” by increasing the upper limits of paid‑up share capital to 20 crore rupees and turnover to 200 crore rupees, thereby allowing a larger base of companies to access relaxed compliance norms
   • Provides further relaxations in Corporate Social Responsibility (CSR) including higher eligibility thresholds for applicability, extended timelines (90 days instead of 30 days) for transferring unspent CSR amounts relating to ongoing projects and enabling exemptions for prescribed classes of companies from CSR obligations.
   • Permits exemption from mandatory auditor appointment and certain other compliance requirements for prescribed classes of small companies, with detailed conditions to be prescribed by rules.
   • Requires Producer Companies crossing an average annual turnover of 5 crore rupees (or such other amount as may be prescribed) to appoint an internal auditor, with manner and intervals of internal audit to be prescribed.
3. Procedural simplifications in incorporations, filings and strike‑off:
   • Makes professional certification (advocate/CA/CS/CMA) at the time of incorporation optional: the declaration in prescribed form by such professionals will apply only where the company actually engages them.
   • Replaces certain affidavits (including in section 7 and section 374) with self‑declarations in prescribed form, thus reducing notarisation requirements.
   • Simplifies voluntary strike‑off by clarifying grounds, requiring liabilities to be extinguished in a prescribed manner, allowing objections from “any person”, and refining language around the date of striking‑off and related procedures.
   • Introduces web‑presence and electronic communication requirements for prescribed companies by mandating maintenance of a website, email address and other modes of communication, and permitting service of specified documents only in electronic mode, subject to rules (with the ability of members to seek physical copies to be addressed in rules).
4. Streamlining meetings, governance and board‑level requirements:
   • Enables companies to hold Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs) physically, through video conferencing or other audio‑visual means, or in hybrid mode, with a requirement that every company must hold at least one physical AGM once in every three years.
   • Provides that where the requisite number of members requisition a meeting in hybrid mode, the company shall be required to hold the meeting in that mode.
   • Strengthens disclosure and board reporting by mandating in the Board’s report:
     • a separate clause for the Board’s explanations or comments on every adverse auditor observation under section 143(3)(f) and on qualifications or adverse remarks relating to maintenance of accounts under section 143(3)(h); and
     • disclosure of the composition of the Audit Committee and reasons for non‑acceptance of any recommendation of the Audit Committee by the Board.
   • Tightens and clarifies director‑related provisions including: enhanced “fit and proper” criteria to be prescribed by rules for eligibility (with flexibility to specify different criteria for different company classes), additional disqualifications (e.g. where a person has recently been an auditor/secretarial auditor/cost auditor/registered valuer/insolvency professional of the company or certain group entities), and expanded rules for deactivation/cancellation/reactivation/surrender of Director Identification Numbers.
   • Introduces an explicit framework for resignation of whole‑time key managerial personnel who are not directors including notice and Board/Registrar intimation requirements.  

Source: E-Gazette