Modernising Indian Corporate Law, How the Companies (Amendment) Bill, 2026, Aims to Balance Ease of Doing Business with Governance
The Corporate Laws (Amendment) Bill, 2026, introduced in the Lok Sabha on March 23, represents a significant step in the ongoing evolution of India’s corporate regulatory framework. The Bill proposes wide-ranging amendments to the Companies Act, 2013, and the Limited Liability Partnership (LLP) Act, 2008, with the dual objectives of further easing the burden of doing business while simultaneously strengthening governance. The emphasis is on practicality—removing friction from corporate action, making enforcement proportionate, modernising internal governance workflows, and concentrating regulatory discipline where it matters most. The Bill has been referred to a joint parliamentary committee (JPC) for scrutiny and stakeholder inputs before it returns for final consideration.
A key feature of the proposed amendments is making compliance more proportionate to the size of an enterprise while retaining essential governance discipline. The proposed expansion of the “small company” thresholds—paid-up capital from ₹10 crore to ₹20 crore and turnover from ₹100 crore to ₹200 crore—could bring more entities in the growth stage into a lighter compliance regime without lowering baseline standards. This is a welcome recognition that a one-size-fits-all approach to corporate regulation imposes unnecessary burdens on smaller firms. Additional fees for delayed filings are to be rationalised, including overall caps, and the timeline for charge registration has been extended, with the overall window now up to 180 days. This reduces punitive outcomes for procedural delays and supports timely regularisation. Compliance requirements have also been eased for small, one-person, and dormant companies, which will now need only one board meeting per year. Disclosures of director interest, under Form MBP-1, have been moved from the annual filing to a change-based trigger, reducing the volume of routine paperwork.
The Bill also aligns corporate law with modern capital and talent realities. Recognising contemporary share-linked reward instruments beyond traditional employee stock option plans (ESOPs) reflects how companies structure incentives today. The modernisation of buyback provisions is another significant move. Expanded eligibility (including ESOPs, sweat equity, and similar schemes), flexibility for prescribed classes to undertake up to two buybacks a year (subject to a minimum gap), clearer computation mechanics, and the removal of affidavit-based solvency verification will all contribute to more agile capital management. With safeguards built through rules, these changes can reduce interpretational disputes and improve capital-management agility, particularly where companies are returning surplus cash or managing dilution from incentive plans.
A third theme is digital-first governance with appropriate checks intact. The Bill proposes that annual general meetings (AGMs) and extraordinary general meetings (EGMs) may be held in physical mode, through videoconferencing or audiovisual means, or in hybrid form, subject to conditions. This flexibility allows companies to adopt the meeting format that best suits their needs, while the requirement that at least one physical AGM be held every three years preserves periodic in-person shareholder interaction. EGMs through videoconferencing may be convened on shorter notice—at least seven days or as prescribed. As electronic service becomes the default for prescribed classes, government agencies shift focus from dispatch to proof-of-service integrity, record-keeping, and stronger internal standard operating protocols.
Rationalising corporate social responsibility (CSR) obligations is another important aspect of the Bill. The net profit trigger for mandatory CSR spending rises from ₹5 crore to ₹10 crore (or as prescribed), the timeline for transferring unspent CSR amounts for ongoing projects has been extended from 30 to 90 days from year-end, and the threshold for constituting a CSR committee is proposed to be increased from ₹50 lakh to ₹1 crore (or as prescribed). An enabling provision allows prescribed classes to be exempt from CSR subject to conditions, creating room for a more fact-based approach over time. These changes recognise that CSR compliance has, in some cases, become a disproportionate burden on smaller companies.
On corporate action and exits, several proposals can reduce procedural drag and improve predictability. Fast-track mergers and demergers become more workable through a 75 per cent “present and voting” approval threshold, and the jurisdiction of one bench of the National Company Law Tribunal (NCLT) for schemes based on the transferee or resultant company can reduce multi-bench filings. Restricting schemes for companies already in liquidation addresses overlap risks with insolvency processes. Strike-off grounds expand for inactive or non-filing companies, restoring prescribed categories shifts to regional directors, and summary liquidation is clarified, including the appointment of an official liquidator or a registered insolvency professional—supporting quicker, more proportionate exits for low-risk closures. These provisions are designed to make it easier for companies that have ceased operations to exit the system cleanly, freeing up resources and reducing the burden on the regulatory apparatus.
The Bill also proposes to streamline compliance for entities in International Financial Services Centres (IFSCs) by moving them to a foreign-currency standard for share capital and financial records, with INR presentation allowed only where the International Financial Services Centres Authority permits. This aligns IFSC entities with the international standards that are appropriate for their operating environment.
Perhaps the most significant evolution in the Bill is the move from criminalisation to proportionate enforcement. Routine defaults shift from fine or prosecution to civil penalties; adjudication matters by regional directors are expanded, freeing up NCLT time and enabling speedier resolution; and settlement and recovery mechanisms strengthen enforceability while reducing fear-based compliance. Pre-deposit requirements for certain appeals and higher compounding thresholds at the level of regional directors should encourage administrative closure over prolonged tribunal paths, while preserving remedies for genuine disputes. This is a philosophical shift: the recognition that not every procedural lapse deserves criminal sanction, and that the law should distinguish between intentional wrongdoing and administrative oversight.
Where the government can add disproportionate value is by sharpening last-mile mechanics so that intent translates into real experience. In incorporation, issues are often operational rather than legal. Wider acceptable address proofs, validity windows for cross-border execution, and a more responsive escalation mechanism at the processing stage would improve transparency and predictability. On exits, enabling a controlled mechanism to repatriate surplus funds during strike-off (after filing but before final order), expanding the practical reach of summary liquidation through thresholds and digital-first mechanics, and considering a fast-track administrative exit for non-operational distressed entities (with safeguards) would strengthen capital recycling and investor confidence.
Overall, the Bill is directionally strong—simpler where risk is low and sharper where the public interest is high. It recognises that India’s corporate landscape has changed dramatically since the Companies Act, 2013 was enacted. The economy has grown, technology has transformed business operations, and the expectations of investors and other stakeholders have evolved. The Bill responds to these changes by making the law more flexible, more proportionate, and more aligned with modern business practices. With last-mile refinements incorporated through the JPC process, it can deliver a more predictable and business-aligned corporate framework in practice. The balance between ease of doing business and robust governance is delicate, but the Bill appears to strike it thoughtfully.
Questions and Answers
Q1: What are the key features of the proposed expansion of “small company” thresholds?
A1: The Bill proposes expanding the “small company” thresholds by raising paid-up capital from ₹10 crore to ₹20 crore and turnover from ₹100 crore to ₹200 crore. This would bring more growth-stage entities into a lighter compliance regime without lowering baseline standards. It also eases compliance requirements for small, one-person, and dormant companies, which will now need only one board meeting per year.
Q2: How does the Bill modernise provisions related to employee stock options and buybacks?
A2: The Bill recognises contemporary share-linked reward instruments beyond traditional ESOPs. For buybacks, it proposes expanded eligibility (including ESOPs, sweat equity, and similar schemes), flexibility for up to two buybacks a year (with a minimum gap), clearer computation mechanics, and removal of affidavit-based solvency verification. This improves capital-management agility.
Q3: What changes are proposed to corporate social responsibility (CSR) obligations?
A3: The Bill raises the net profit trigger for mandatory CSR spending from ₹5 crore to ₹10 crore, extends the timeline for transferring unspent CSR amounts for ongoing projects from 30 to 90 days, and increases the threshold for constituting a CSR committee from ₹50 lakh to ₹1 crore. It also allows prescribed classes to be exempt from CSR subject to conditions.
Q4: How does the Bill shift from criminalisation to proportionate enforcement?
A4: The Bill proposes that routine defaults shift from fine or prosecution to civil penalties. Adjudication matters by regional directors are expanded, freeing up NCLT time. Settlement and recovery mechanisms strengthen enforceability while reducing fear-based compliance. Pre-deposit requirements for certain appeals and higher compounding thresholds encourage administrative closure over prolonged tribunal paths.
Q5: What last-mile refinements do the authors suggest to make the Bill more effective in practice?
A5: The authors suggest:
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Incorporation: Wider acceptable address proofs, validity windows for cross-border execution, and a more responsive escalation mechanism.
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Exits: A controlled mechanism to repatriate surplus funds during strike-off, expanding the practical reach of summary liquidation through thresholds and digital-first mechanics, and a fast-track administrative exit for non-operational distressed entities (with safeguards). These would strengthen capital recycling and investor confidence.
