The Corporate Laws (Amendment) Bill, 2026: Simplifying India’s Corporate Framework

Building on earlier amendments to the Companies Act, 2013 (“Companies Act”), the recently introduced Corporate Laws (Amendment) Bill, 2026 (the “Bill”) is currently before a Joint Parliamentary Committee (“JPC”), after being tabled in the Lok Sabha. The Bill also seeks to amend the Limited Liability Partnership Act, 2008 (the “LLP Act”). 

The Bill marks a clear shift from rigid compliance and the criminalisation of procedural errors to a more accommodating, trust-based approach.

Some of the key amendments proposed to the Companies Act are as follows: 

1. Decriminalisation of offences: Many offences under the Companies Act are being shifted from criminal liability (fine/prosecution) to civil penalties. This means companies will face fines instead of legal prosecution for technical or procedural lapses, making the regulatory environment more business-friendly. 

2. Proposed Revision to the Definition of ’Small Company’: The definition of a ’small company’ is proposed to be changed by doubling the paid-up capital threshold from INR 100 million (~USD 1 million) to INR 200 million (~USD 2 million) and the turnover threshold from INR 1 billion (~USD 11 million) to INR 2 billion (~ USD 21 million). This will mean that more companies will qualify for a lighter compliance regime. 

3. From Physical to Digital Corporate Governance: The Bill moves corporate governance further towards a digital and flexible system, simplifying board and shareholder meetings and promoting e-communication for statutory processes. 

   Statutory Meetings: Annual General Meetings (“AGMs”) and Extraordinary General Meetings (“EGMs”) will be permitted to be held physically, through video conferencing (“VC”), or other audio-visual means (“OAVM”), including in a hybrid format. At the same time, at least one AGM is to be held physically every 3-years, ensuring periodic in-person participation. 

   Statutory Meetings: Annual General Meetings (“AGMs”) and Extraordinary General Meetings (“EGMs”) will be permitted to be held physically, through video conferencing (“VC”), or other audio-visual means (“OAVM”), including in a hybrid format. At the same time, at least one AGM is to be held physically every 3-years, ensuring periodic in-person participation. 

   Statutory Timelines for EGMs: Procedural timelines are also proposed to be streamlined such that EGMs conducted through VC or OAVM may be called on 7 days’ notice (or as prescribed), replacing the earlier 21 day notice requirement. This is intended to ease logistical issues and speed up shareholder decision-making in urgent cases. 

   Official Communication: The reforms strengthen digital compliance by requiring certain companies to maintain updated websites, official email IDs, and other digital communication channels. This improves transparency and enables faster communication between companies, regulators, and stakeholders. This requirement will apply to listed companies and certain other unlisted public companies. 

4. Relaxed Board Meeting Norms for Small, One Person Companies (OPCs) and Dormant Companies: Small companies, OPCs, and dormant companies will only need to hold 1 board meeting in a calendar year instead of holding at least 1 board meeting in each half of a calendar year, with a gap between 2 board meetings of not less than 90 days. This significantly reduces compliance effort for smaller entities. 

5. Realignment of Financial Year: The Bill allows companies or body corporates that previously changed their financial year (with regulatory approval) to realign it back to the year ending March 31^st of the following year. This provides flexibility for companies that had shifted their financial year for consolidation purposes but now wish to revert, particularly foreign subsidiaries that aligned with their overseas parent companies (for example, in the US or other jurisdictions) for group reporting and consolidation. 

6. Recognition of Share-based schemes: The Bill seeks to formally recognise widely-used global executive compensation instruments such as restricted stock units and stock appreciation rights, which currently lack explicit statutory recognition under Indian corporate law, in addition to employee stock ownership plans (“ESOPs”). This amendment broadens the scope of share-based compensation and investment instruments by bringing such share-linked structures within the statutory framework, moving beyond the earlier ESOP-centric regime.

7. Relaxation in buy-back provisions: Companies will get more flexibility in buying back their shares. They will be allowed to carry out buy-backs more frequently, up to 2 times in a year, which helps in better financial and capital management. The Bill also allows certain companies to undertake buy-backs up to a higher percentage of their capital and free reserves.

8. Additional disclosures under the Directors’ report: The Bill proposes the following additional disclosures in the directors’ report, with a view to enhancing transparency: 

1. auditors’ observations, comments, or adverse remarks, with particular focus on matter relating to financial transactions affecting the functioning of the company and maintenance of accounts and related matters; and 

2. details in respect of composition of the audit committee and instances where the board had not accepted any recommendation of the committee, a statement along with the reasons for the same. 

9. Exemption from appointment of Auditors: Certain categories of companies may be exempted from the requirement to appoint auditors, subject to fulfilment of specified conditions. This is intended to reduce compliance costs and administrative burden for eligible companies, and is largely targeted at small companies. 

10. Appointment of Directors: The Bill proposes to change the tenure of an additional director and a director appointed to fill a casual vacancy such that they may hold office only until the earlier of the next AGM or 3 months from the date of appointment. This is intended to ensure timely shareholder approval and prevent prolonged continuation of board appointments without regularisation. 

The Bill also provides that if a person’s appointment as a director was not considered or was not approved in an EGM, the board cannot appoint that person again as an additional director, alternate director, or as a director to fill a casual vacancy without obtaining the prior approval of the shareholders. 

The Bill clearly moves towards simpler compliance and a more business-friendly framework. It reduces regulatory burden, softens penalties for smaller companies, and updates provisions to match current business practices.

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