Introduction

The Corporate Laws (Amendment) Bill 2026 (“Bill”)[i] was introduced in the Lok Sabha on 23 March 2026, proposing amendments across 107 clauses to the Companies Act 2013[ii] and the Limited Liability Partnership Act 2008,[iii] drawing significantly from the Company Law Committee Report of 2022 and the 2025 Committee report on Non- Financial Regulatory reforms.[iv][v] The Bill reduces compliance burdens while tightening oversight of institutions and individuals carrying the greatest governance risk. This analysis examines whether those objectives are consistently achieved across all provisions.

Decriminalisation

The Bill decriminalises multiple offences under the Companies Act 2013, converting criminal liability for procedural failures into civil monetary penalties. Section 447[vi] drew no clear line between a procedural default and substantive fraud. The Bill reclassifies failures such as non-furnishing of information to the Registrar and contraventions of account-maintenance rules as civil violations,[vii] with contravention of section 128[viii] now attracting a fixed monetary fine rather than prosecution. The existing electronic in-house adjudication mechanism is expanded with new layers.The concern here is incentive design. If penalties are low, enough to be absorbed as a routine cost, then the exercise achieves relief without accountability. The Bill leaves penalty quantum to subordinate legislation that is not yet drafted, where the deterrence question will be settled.

Small Company Thresholds and CSR Recalibration

The Bill doubles small company thresholds under section 2(85),[ix] thereby raising the paid-up capital from Rs 10 crore to Rs 20 crore and turnover from Rs 100 crore to Rs 200 crore.[x] This brings a larger cohort of mid-sized enterprises within reduced-compliance regimes. The Corporate Social Responsibility (“CSR”) threshold under section 135[xi] is similarly revised: the net profit trigger is raised from Rs 5 crore to Rs 10 crore,[xii] and the unspent CSR fund transfer period for ongoing projects is extended from 30 to 90 days.[xiii]

Then arises the distribution concern. Mandatory CSR was introduced because voluntary practices proved inadequate. Raising the threshold excludes profitable mid-sized companies without any mechanism to track voluntary spending. The operational relief is justified; the absence of a fallback mechanism is not.

Statutory Recognition

The Bill makes significant changes by recognising Restricted Stock Units (“RSUs”) and Stock Appreciation Rights (“SARs”) through a revised section 62 (1) (b) of the Companies Act 2013.[xiv] Currently, companies structuring equity rewards have to implement them under the restrictive Employee Stock Option Plan (“ESOP“) framework defined under Section 62(1)(b) of the Companies Act 2013 as a right to purchase shares at a pre- determined price, as per Rule 12 of the Companies (Share Capital and Debentures) Rules 2014, which mandates a minimum one year vesting period and shareholder approval by special resolution. RSUs and SARs, which involve automatic share allotment and cash settlement respectively, cannot fit this definition, making companies to artificially address them as ESOPs. This amendment corrects that anomaly by expanding Section 62(1)(b) to cover schemes linked to the value of share capital, providing RSUs and SARs a proper statutory place.[xv]

However, without a corresponding amendment in the Income Tax Act 2025,[xvi] this reform remains incomplete. RSUs and SARs trigger tax liability at the time of allotment. The only relief available is a deferral now preserved under the Income-tax Act, 2025 but it covers only startups that are both DPIIT-recognised and separately certified under Section 80-IAC by the Inter-Ministerial Board.[xvii] As of 2026, only around 4,000 out of nearly 2 lakh DPIIT-recognised startups qualify.[xviii] The Bill does not extend this deferral to the much larger universe now covered by the RSU/SAR recognition.

Regulatory Strengthening and Director Accountability

The Bill grants National Financial Reporting Authority (“NFRA”) body-corporate status with perpetual succession and its own fund,[xix] expanding its toolkit. It includes advisories, censures, and warnings. The fit and proper mandate in section 164[xx] requires the boards to document that every director meets prescribed criteria. Defaults in related party transactions under section 188[xxi] now trigger directorship disqualification, and a new section 203A[xxii] formalises the resignation process for non-director Key Managerial Personnel. For International Financial Services Centre (IFSC) companies, a new section 43A[xxiii] permits foreign-currency share capital, books, and regulatory filings, which reduces the incentive for Indian startups to maintain Singapore or Mauritius holding structures. Implementation will determine the practical value.

Virtual Meetings: Flexibility and Its Governance Cost

The Bill now recognises virtual and hybrid Annual General Meeting (AGMs) and Extraordinary General Meeting (EGMs),[xxiv] requiring a physical AGM at least only once every three years. The operational benefits for geographically distributed shareholders are real. The governance concern is that physical meetings allow minority shareholders to appear, observe management, and raise concerns in ways that video conferencing constraints. The requirement of 3 years acts as a shield, and the Joint Parliamentary Committee (“JPC”) review should benchmark these protections as opposed to Securities and Exchange Board of India (SEBI)’s framework for the listed companies.

Conclusion

The Bill is a significant step ahead for India’s startups and companies. The proposal to decriminalise minor non-compliances is expected to save companies from prolonged litigation. Additionally, allowing businesses in special economic zones to operate entirely in foreign currency is anticipated to improve operational efficiency. But there remain gaps that make it a half-made roadmap. First, while decriminalisation is proposed, the Bill doesn’t provide clarity on civil liabilities or financial penalties. Second, the Bill recognises equity rewards (like RSUs and SARs) which will save the cash reserves while focusing on hiring talent, but the tax laws haven’t been made to adapt these provisions, potentially creating a financial burden on employees. Third, since the Bill is based on a 2022 committee report and the 2025 Committee on Non- Financial Regulatory reforms,[xxv] [xxvi] the areas of Environmental, Social and Governance (ESG) disclosures, algorithmic accountability, and digital assets are not fully integrated. The JPC review remains the primary mechanism to address these gaps before the Bill gets finalised.

References:

[i] Corporate Laws (Amendment) Bill 2026 (Bill No 85 of 2026).
[ii] Companies Act 2013 (No 18 of 2013).
[iii] Limited Liability Partnership Act 2008 (No 6 of 2009).
[iv] Ministry of Corporate Affairs, ‘Report of the Company Law Committee 2022’ (Government of India, February 2022).
[v] ‘Corporate Laws (Amendment) Bill 2026: Introduced to Amend Companies and LLP Laws’ (Saraf Partners, 21 April 2026)
[vi] Companies Act 2013 (No 18 of 2013) s 447.
[vii] Corporate Laws (Amendment) Bill 2026 (Bill No 85 of 2026) cls 38-45.
[viii]ibid cl 40 (amending Companies Act 2013 s 128).
[ix] Companies Act 2013 (No 18 of 2013) s 2(85).
[x] Corporate Laws (Amendment) Bill 2026 (Bill No 85 of 2026) cl 3 (amending Companies Act 2013 s 2(85)).
[xi] Companies Act 2013 (No 18 of 2013) s 135.
[xii] Corporate Laws (Amendment) Bill 2026 (Bill No 85 of 2026) cl 62 (amending Companies Act 2013 s 135).
[xiii] ibid cl 62(b).
[xiv] Corporate Laws (Amendment) Bill 2026 (Bill No 85 of 2026) cl 28 (amending Companies Act 2013 s 62(1)(b))
[xv] Companies (Share Capital and Debentures) Rules 2014 (GSR 265(E)) r 12.
[xvi] Income-tax Act 2025 (Act No 30 of 2025) s 17(1)(d)
[xvii] Section 80-IAC: Perquisite Tax Deferral for ESOPs and Sweat Equity (Equitylist, 26 March 2026)
[xviii] ‘ESOP Tax Deferral for Startups: 80-IAC’ (Patron Accounting, 8 April 2026)
[xix] Corporate Laws (Amendment) h 2026 (Bill No 85 of 2026) (amending Companies Act 2013 s 132).
[xx] ibid cl 80 (amending Companies Act 2013 s 164).
[xxi] Companies Act 2013 (Act No 18 of 2013) s 188 (as amended by Corporate Laws (Amendment) Bill 2026 (Bill No 85 of 2026))
[xxii] ibid cl 83 (inserting Companies Act 2013 s 203A).
[xxiii] ibid cl 20 (inserting Companies Act 2013 s 43A).
[xxiv] ibid cl 49 (amending Companies Act 2013 ss 96, 100).
[xxv] Ministry of Corporate Affairs, ‘Report of the Company Law Committee 2022’ (Government of India, February 2022) cls 1.2–1.5 (recommending the structural overhaul of small company capitalization limits under section 2(85) and the statutory integration of equity compensation schemes to reduce compliance friction).
[xxvi] ‘Corporate Laws (Amendment) Bill 2026: Introduced to Amend Companies and LLP Laws’ (Saraf Partners, 21 April 2026)