The Corporate Laws (Amendment) Bill, 2026 (the “Bill”) was introduced in the Lok Sabha on 23rd March 2026. The Bill proposes several extensive amendments in the corporate laws, including the Limited Liability Partnership Act, 2008 (the “LLP Act”) and the Companies Act, 2013 (the “Companies Act”). The propositions stipulated under the Bill seek to decriminalize several defaults, modernize corporate governance compliances and ease related burdens for the companies, while aiming to bring in better oversight of the National Financial Reporting Authority (the “NFRA”), and to further address the ambiguities in the existing corporate laws framework.
Key Amendments Proposed Under LLP Act
The Bill proposes several amendments to the LLP Act, including decriminalization of certain minor offences, including under Section 76A (Adjudication of Penalties) of the LLP Act, whereby the Bill proposes to provide a structured mechanism for limited liability partnerships and their partners to apply for adjudication of penalties. Procedural violations that previously attracted criminal liability such as imprisonment are now proposed to be included in the scope of civil defaults.
Furthermore, the Bill also proposes to address compliance burdens under Section 25 (Registration of changes in Partners) of the LLP Act by mandating limited liability partnerships regulated by the Securities and Exchange Board of India, or by the International Financial Services Centres Authority (the “IFSC”), as may be prescribed, to furnish the details of changes to the partners to the registrar on an annual basis, in such form and manner, as may be prescribed.
Section 32 (Form of Contribution) has been proposed to be amended whereby the monetary value of contribution of each partner of a specified limited liability partnership registered with IFSC shall be accounted for and disclosed in a permitted foreign currency. A limited liability partnership set up in IFSC prior to the commencement of the proposed Corporate Laws (Amendment) Act, 2026, may convert the monetary value of contribution of each of its partners from Indian rupee to a permitted foreign currency within such period and in such manner, as may be specified by the IFSC, in consultation with the Central Government. Furthermore, such limited liability partnership shall not be permitted to receive or accept monetary contribution from any partner without converting its monetary contribution into a permitted foreign currency. This amendment aims to ensure that any contributions made by partners are accounted for and are appropriately converted. Furthermore, the valuation framework stipulated under Section 247 of the Companies Act, has been proposed to be made applicable to the limited liability partnerships under Section 33A (Provisions of Companies Act, 2013 to apply for valuation), for the valuation of a partner’s contribution, and the property, assets and liabilities of the limited liability partnerships under the LLP Act.
Additionally, the Bill proposes the introduction of a new Section 57A (Conversion from specified trust into limited liability partnership) under the LLP Act, which allows certain trusts to convert into limited liability partnerships in the manner provided under the newly proposed fifth schedule under the LLP Act. The trusts registered under the Indian Trusts Act, 1882, or any trusts registered under any central or state legislations and registered by the Securities and Exchange Board of India, or by the IFSC, as the case may be, having such activities as may be prescribed, may now convert themselves into limited liability partnerships.
The proposed amendments under the LLP Act intend to introduce clear requirements for the limited liability partnerships operating under the IFSCs, including but not limited to, conversion of trusts, valuation framework and disclosures by applicable partners.
Key Amendments Proposed Under Companies Act
The Bill proposes to amend Section 62(1)(b) (Further issue of share capital) of the Companies Act, to permit further issue of shares to employees, in addition to the employee stock option plans (the “ESOPs”), recognizing other instruments linked to the value of share capital of a company as a form of a non-cash consideration along with ESOPs. The Bill has also proposed a corresponding amendment under Section 42(2) (Issue of shares on private placement basis) of the Companies Act, whereby the term “or such other scheme linked to value of the share capital if a company” has been inserted. Relatedly, Section 68 (Power of company to purchase its own securities) of the Companies Act has been proposed to be amended to enable prescribed classes of companies to undertake buy-backs of shares up to such percentage of their aggregate paid-up capital and free reserves, as may be prescribed. This amendment would permit such companies to carry out up to two buy-back offers within a period of one year reckoned from the date of the closure of the preceding offer of buy-back, provided that, the second is initiated no earlier than 6 months from the closure of the first. Further, the prohibition on buy-backs is proposed to be extended to cover schemes linked to the value of share capital under Section 62(1)(b) ensuring consistency with the other provisions. The Bill has also proposed to omit the requirement for the declaration of solvency to be verified by affidavit, thereby reducing procedural compliance.
Furthermore, certain class or classes of companies are now proposed to be mandated to maintain a website, e-mail address and other modes of communication, and to intimate such details to the registrar in the prescribed manner under the proposed Section 12A (Certain class or classes of companies to maintain modes of communication and provide particulars). Section 96 (Annual General Meeting) and Section 100 (Extraordinary General Meeting) of the Companies Act has been proposed to be amended to permit companies to hold general meetings either physically, or through video conferencing or other audio-visual means, or in a hybrid mode. Additionally, where the appropriate number of members requisition a meeting to be conducted in hybrid mode, the company shall be obliged to comply. A mandate has been introduced that every company shall hold its annual general meeting in physical mode at least once in every three years.
The Bill also proposes to amend Section 2(85) of the Companies Act, by increasing the thresholds for classification of a ‘small company’, whereby the paid-up share capital threshold is proposed to be increased from ten crore rupees to twenty crore rupees, and the turnover threshold from one hundred crore rupees to two hundred crore rupees. This amendment is aimed at expanding the scope of companies eligible for reduced compliance requirements and regulatory relaxations.
With respect to board-level disclosures, the Bill introduces two major disclosures that shall have to be mandatorily made for the report provided by the board of directors of a company under Section 134(3) (Financial statement, Boards’s report, etc.) of the Companies Act. Pursuant to the Bill, the board of a company shall now be required to provide explanations or comments on every observation or comment of the auditors on financial transactions or matters which have any adverse effect on the functioning of the company under clause (f) of sub-section (3) of section 143 and any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith under clause (h) of the said sub-section. Furthermore, the board of a company shall also be required to disclose the composition of the audit committee, and a statement providing reasons for not accepting the recommendations of such committee. This amendment intends to bring in transparency pertaining to any adverse finding of the committee and the company’s actions pursuant to such findings.
On the regulatory front, Section 132A to 132K (Constitution of National Financial Reporting Authority) has been proposed to be introduced under the Companies Act, which expressly strengthens the NFRA by conferring it with independent regulatory powers and expanding its scope of enforcement. As per the Bill, the NFRA would be empowered to issue summons. Furthermore, the Bill provides that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the NFRA is empowered to determine by or under the Companies Act and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken by the NFRA in pursuance of any power conferred by or under the Companies Act. Collectively, these provisions proposed under Section 132A to 132K seek to establish a comprehensive NFRA led regulatory framework comprising of oversight and enforcement related powers. Moreover, by providing such discretionary powers to NFRA, the Bill also significantly lessens the burden on the courts.
Finally, one of the key propositions under the Bill is the decriminalization of various procedural defaults under the Companies Act, including statutory filings and minor non-compliances. Furthermore, the Bill also proposes to fix penalties for certain non-compliances, such as under Section 4 of the Companies Act, in the event it is found that a name for reservation was applied by furnishing wrong or incorrect information, the Bill proposes to decrease the penalty to Rupees Fifty Thousand from the current Rupees One Lakh.
The Bill proposes a new framework under Section 454C (Settlement) of the Companies Act, enabling the companies liable for penalty due to contraventions, subject to provisions stipulated under such amendment, liable for settlement. Furthermore, a corresponding recovery procedure under the proposed Section 454B empowers authorities to recover unpaid penalties through attachment of movable and immovable property and bank accounts, and arrest or detention of such person.
Impact of the Amendments
The amendments proposed in the Bill certainly intend to modernize and streamline the corporate legal framework and decrease certain regulatory burdens by decriminalizing various offences to categorize them under the scope of civil offences, and while such initiatives are aligned with the objective of ‘ease of business’ for companies, a major concern arising from these amendments remains standing. The company-friendly approach of the government to decriminalize and lessen the liabilities of the companies and their officers may weaken the deterrent effect that comes along with criminal liabilities and might encourage non-compliance.
Furthermore, a notable shift introduced by the Bill is the integration of entities operating in IFSCs into a foreign currency-denominated framework, aligning Indian corporate structures more closely with global financial practices.
Conclusion
It is evident that the proposed amendments to the LLP Act and the Companies Act are aimed towards creating a corporate friendly culture in India and attract more industries while fostering and reflecting a progressive shift towards enhancing the ease of doing business to attract investment and improve compliance related burdens.
However, it is important to ensure that such amendments are implemented with adequate safeguards and effective regulatory oversight, to ensure that the proposed framework strikes a balanced approach in facilitating business operations while preserving corporate accountability for companies and limited liability partnerships. The Bill nevertheless, reflects a positive and calibrated shift in India’s corporate regulatory approach, reducing criminal exposure for procedural lapses while simultaneously strengthening institutional oversight and enforcement mechanisms.
(Views are personal)
