TL;DR — Why This Bill Matters
The Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026) overhauls both the Companies Act, 2013 and the LLP Act, 2008 — doubling small company thresholds, formalising hybrid AGMs, creating a foreign-currency regime for IFSC entities, transforming NFRA into a full-fledged regulator, tightening auditor rules, and introducing a new settlement mechanism. It is still a Bill, referred to a Joint Parliamentary Committee (JPC) and not yet in force.
The Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026), introduced in the Lok Sabha in the 77th year of the Republic of India, is the most comprehensive overhaul of Indian corporate law in over a decade. It simultaneously amends two foundational statutes — the Limited Liability Partnership Act, 2008 and the Companies Act, 2013 — across 60+ clauses covering IFSC reforms, NFRA transformation, small company thresholds, AGM flexibility, buy-back liberalisation, valuation professionalisation, decriminalisation, and much more. The Bill has been referred to a Joint Parliamentary Committee (JPC) for detailed scrutiny before enactment.
💡 Bill at a Glance
| Full Name | The Corporate Laws (Amendment) Bill, 2026 |
| Bill No. | Bill No. 85 of 2026 |
| Introduced In | Lok Sabha (77th Year of the Republic) |
| Acts Amended | LLP Act, 2008 + Companies Act, 2013 |
| Current Status | Referred to Joint Parliamentary Committee (JPC) |
| Commencement | Date(s) to be notified by Central Government in Official Gazette |
🏛️ Chapter II — Amendments to the LLP Act, 2008
1. New Definitions — IFSC, IFSCA, Permitted Foreign Currency, Specified IFSC LLP (Section 2 of LLP Act)
The Bill inserts four new definitions into the LLP Act to create a proper legal framework for LLPs operating in India's International Financial Services Centres (IFSCs like GIFT City):
| New Term | Definition |
|---|---|
| International Financial Services Centre (IFSC) | As defined in clause (g) of S.3(1) of the IFSCA Act, 2019 — currently GIFT City, Gandhinagar |
| International Financial Services Centres Authority (IFSCA) | The regulatory authority under S.4(1) of the IFSCA Act, 2019 |
| Permitted Foreign Currency | Currency specified by IFSCA in consultation with the Central Government (e.g., USD) |
| Specified IFSC LLP | An LLP set up in an IFSC and regulated by IFSCA |
2. Incorporation of Specified IFSC LLP — Mandatory Objects (Section 11)
❌ Current Law
A single declaration by any subscriber confirming compliance with the Act was required. No separate professional declaration. No special objects requirement for IFSC LLPs.
✅ Proposed Change
Two-part requirement: (c) subscriber's statement of compliance, AND (d) a separate professional declaration by an advocate/CA/CMA/CS in practice where such professionals were engaged. Specified IFSC LLPs must state their objects as financial services activities permitted under IFSCA Act.
3. IFSC LLP — Registered Office, Name, and Contribution Rules (Sections 13, 15, 32, 34)
| Section | Current Position | Proposed Change |
|---|---|---|
| S.13 — Registered Office | No special rule for IFSC LLPs | Specified IFSC LLP must have its registered office at an IFSC at all times |
| S.15 — Name | Standard "LLP" suffix for all | Specified IFSC LLP must use suffix "International Financial Services Centre LLP" |
| S.32 — Contribution | Contribution in Indian Rupees | Specified IFSC LLP must disclose/account contribution in permitted foreign currency. Existing IFSC LLPs may convert from INR within a prescribed period; after commencement, no new INR contributions allowed without prior conversion |
| S.34 — Books of Account | Maintained in INR | Specified IFSC LLP must maintain books/financial statements in permitted foreign currency; Indian rupee presentation permitted only if IFSCA allows |
4. Valuation for LLPs — Section 247 Companies Act to Apply (New Section 33A)
📝 New Section 33A — Valuation Rules Extended to LLPs
The valuation provisions of Section 247 of the Companies Act, 2013 will now apply mutatis mutandis to LLPs — for valuation of partner contributions, property, assets, net worth, or liabilities. This means LLP valuations must be done by registered valuers recognised under the Companies Act framework.
5. Trust → LLP Conversion — New Section 57A + Fifth Schedule (Most Significant LLP Change)
This is the most transformative LLP amendment. The Bill introduces a new conversion route — allowing SEBI/IFSCA-registered trusts (Alternative Investment Funds, Category I/II/III funds) to convert directly into LLPs. This is a landmark change for the fund management industry.
📌 What is a "Specified Trust"?
A trust established under the Indian Trusts Act, 1882 or any Central/State Act, AND registered by SEBI or IFSCA, having such activities as may be prescribed. In practice, this primarily covers AIFs (Alternative Investment Funds) registered as trusts with SEBI.
Eligibility Condition: The partners of the resulting LLP must be exclusively the trustees of the converting trust — no one else can be a partner.
Documents to be Filed (Fifth Schedule, Para 4):
- Statement by all trustees with name, registration number, establishment date, SEBI/IFSCA registration date
- Consent of ¾ (three-fourths) of investors of the trust
- Incorporation document and statement under Section 11
Effects of Conversion:
- All property (movable, immovable, intangible), assets, rights, liabilities, and undertaking automatically vest in the LLP without any deed or further assurance
- The trust is deemed dissolved upon registration
- All existing agreements, contracts, appointments, employment contracts, and legal proceedings continue as if the LLP were party thereto
- Trustees remain personally liable (jointly and severally with LLP) for pre-conversion liabilities
- LLP must carry a notice of conversion in all official correspondence for 12 months (starting no later than 14 days after registration)
- LLP must inform relevant authority within 15 days of registration
⚠️ Penalty for Non-Disclosure of Conversion
Failure to disclose conversion in correspondence: Fine of ₹10,000 to ₹1,00,000 + ₹50 to ₹500 per day of continuing default.
6. LLP Registrar Appeal — New Section 68B
Any person aggrieved by the Registrar's decision under Section 12 (incorporation) or Section 16 (change of name) may now prefer an appeal to a prescribed officer of the Central Government. Previously, no express statutory appeal mechanism existed for these decisions.
7. Adjudication of Penalties — Section 76A Strengthened
❌ Current Position
No explicit provision for LLP/partner to apply for adjudication of penalty. No transition mechanism for pre-amendment offences pending in courts.
✅ Proposed Change
New S.76A(1A): LLP, partner, or designated partner may apply for adjudication of penalty in prescribed form. New S.76A(10): Central Government may notify a scheme to handle withdrawal of complaints and transfer of pending court matters to adjudication under this section.
🏢 Chapter III — Amendments to the Companies Act, 2013
8. Small Company Threshold Doubled — Section 2(85)
This is one of the most commercially significant changes in the Bill, with thousands of mid-sized companies potentially qualifying for simplified compliance regimes.
| Parameter | Current Upper Limit | Proposed Upper Limit | Change |
|---|---|---|---|
| Paid-up Share Capital | ₹10 Crore | ₹20 Crore | ⬆ 2x |
| Annual Turnover | ₹100 Crore | ₹200 Crore | ⬆ 2x |
💼 What Benefits Do Small Companies Get?
Once a company qualifies as small (and after the relevant provisions are notified) — file simplified MGT-7A instead of full MGT-7; enjoy reduced penalties under Section 446B; benefit from only 1 board meeting per year under Section 173(5); and face a lighter disclosure regime across multiple sections. A potential exemption from statutory audit under the proposed Section 139(12) may also become available for prescribed classes of small companies after a separate notification.
⚠️ Exclusions — These Companies CANNOT be "Small Companies" Even if They Meet the Threshold
• Holding company or subsidiary company • Section 8 company (not-for-profit) • Body corporate governed by a special Act (e.g., banking companies)
9. Other Key Definition Changes — Section 2
| Clause | Current Position | Proposed Change |
|---|---|---|
| S.2(28) — Cost Accountant | "Cost and Works Accountants" | "Cost Accountants" (updated to reflect ICAI-CMA's current name) |
| S.2(41) — Financial Year | Only foreign-held companies could apply for different FY | Central Government may allow ANY company/body corporate to realign its financial year to end 31st March (on application) |
| S.2(73A) — Regional Director | Not formally defined in S.2 | New definition: "Regional Director" includes Additional/Joint/Deputy Regional Director under Section 396 |
| S.2(74A) — Registered Valuer | Not formally defined in S.2 | New definition: "Registered Valuer" means a person holding a certificate of registration under Section 247 |
10. Mandatory Website & Digital Communication — New Section 12A
❌ Current Law
No mandatory requirement for companies to maintain or register a website or email address with the ROC.
✅ Proposed Change (S.12A)
Prescribed classes of companies must maintain a website, email address, and other prescribed modes of communication. All details and changes must be intimated to the Registrar within a prescribed period.
11. Electronic Service of Documents Mandatory — Section 20
For prescribed classes of companies, service of prescribed documents to members shall take place only through electronic mode — paper service deemed non-mandatory. Members may still request physical delivery on payment of a fee determined at a general meeting.
12. IFSC Companies — Foreign Currency Share Capital — New Section 43A
Mirroring the LLP amendment, the Bill inserts new Section 43A for companies incorporated in IFSCs:
| Requirement | Details |
|---|---|
| Share Capital Currency | Must issue and maintain share capital in a permitted foreign currency |
| Books of Account | Must be maintained in permitted foreign currency; INR allowed only if IFSCA permits |
| Existing IFSC Companies (pre-commencement) | May convert share capital from INR to foreign currency within prescribed period; after commencement, cannot issue new shares without converting first |
| Fees, Fines, Penalties | Always paid in Indian Rupees only |
13. Expanded Employee Compensation Schemes — Sections 42, 62, 68
The Companies Act currently recognises only Employee Stock Options (ESOPs). The Bill significantly expands this to include other schemes linked to share capital value — covering Restricted Stock Units (RSUs), Stock Appreciation Rights (SARs), and similar instruments.
| Section | Change |
|---|---|
| S.42 — Private Placement | Marginal heading changes "shares" → "securities"; other schemes linked to share capital value included alongside ESOPs |
| S.62 — Further Issue of Capital | Clause (b) expanded to cover schemes linked to share capital value (RSUs, SARs) in addition to ESOPs |
| S.68 — Buy-back | Exemptions in buy-back provisions extended to cover share-value-linked schemes, not just ESOPs |
💡 Practical Impact — RSUs and SARs Now Formally Recognised
Many Indian startups and listed companies already issue RSUs and SARs but had to do so under improvised legal structures. The Bill formally recognises these as securities issuable under Sections 42 and 62, removing legal ambiguity and enabling cleaner structuring of employee compensation plans.
14. Buy-back Liberalisation — Section 68
The Bill makes several significant changes to the buy-back provisions:
| Change | Current Position | Proposed Position |
|---|---|---|
| Maximum buy-back limit | Up to 25% of paid-up capital + free reserves | Prescribed class of companies may have different % as prescribed; 25% limit for equity shares specifically computed on total paid-up equity capital |
| Frequency of buy-backs | Only 1 buy-back offer per year | Prescribed class of companies may make up to 2 buy-back offers per year, provided 2nd offer is not less than 6 months from closure of 1st offer |
| Affidavit requirement | S.68(6): Declaration of solvency had to be "verified by an affidavit" | Words "and verified by an affidavit" omitted — affidavit no longer required (self-declaration sufficient) |
| Penalty for default (Company) | Fine ₹1 lakh – ₹3 lakh | Listed: ₹25 lakh | Unlisted: ₹2 lakh |
| Penalty for default (Officers) | Fine ₹1 lakh – ₹3 lakh | Listed: ₹5 lakh | Unlisted: ₹2 lakh |
15. AGM & EGM — Hybrid Meetings Now Statutory — Sections 96, 100, 101
This is a major ease-of-doing-business change that permanently codifies the pandemic-era practice of virtual meetings into the Companies Act.
❌ Current Law
No permanent statutory provision for AGMs/EGMs via video conferencing. Virtual meetings allowed only through MCA circulars/temporary extensions — not embedded in the Act itself. Physical meeting always required.
✅ Proposed Change
New S.96(3): Companies may hold AGMs physically, through VC/AV means, or in hybrid mode. Members may requisition hybrid mode. Physical AGM mandatory at least once in every 3 years. Similarly, EGMs may also be held physically, virtually, or in hybrid mode (new S.100(7)).
📝 Notice Period for Virtual EGMs — Section 101
EGMs conducted wholly through VC/AV means may be called by giving notice of not less than 7 days (reduced from the standard 21 days), or such other period as may be prescribed. Standard 21-day notice requirement continues for all other EGMs.
16. Unclaimed Shares / IEPF — Sections 124 & 125
The IEPF (Investor Education and Protection Fund) provisions are updated in two important ways:
- Buy-back proceeds added to IEPF: Amounts in respect of shares bought back and extinguished, remaining unpaid/unclaimed for 7+ years, must be transferred to the IEPF (new clause 125(2)(ma))
- "Fund" → "Authority": References throughout Sections 124 and 125 updated from "IEPF Fund" to "IEPF Authority" — reflecting correct institutional identity
- Broader refund scope: Section 125(3)(a) now covers refunds from clauses (h) to (n) of S.125(2), not just unclaimed dividends
- IEPF Authority delegation: New S.125(12) empowers the IEPF Authority to delegate its powers/functions to any member, officer, or other person by notification
17. NFRA — Comprehensive Overhaul — Section 132 + New Sections 132A to 132K
This is the single most extensive change in the entire Bill. The National Financial Reporting Authority (NFRA) is transformed from a quasi-regulatory body into a full-fledged independent statutory body corporate with sweeping new powers.
📊 NFRA Before vs After the 2026 Amendment
| Aspect | Before (Current) | After (Proposed) |
|---|---|---|
| Legal Status | Statutory authority — not a body corporate | Full body corporate — perpetual succession, common seal, can sue/be sued |
| Funding | Central Government grants only | Dedicated NFRA Fund from registration fees, fines, grants |
| Auditor Registration | No mandatory registration with NFRA | Mandatory registration + returns filing for auditors of covered entities (S.132A) |
| Penalties NFRA Can Impose | Debarment + monetary penalty only | Advisory/censure/warning + training direction + referral to Central Govt + debarment + monetary penalty |
| Rule-making Power | Limited; Central Government prescribed | Independent regulation-making power; draft regulations on website for public comment; review every 3 years |
| Non-compliance with NFRA orders | No specific criminal sanction | Imprisonment up to 6 months OR fine ₹1L–₹5L (individual); ₹5L–₹25L (firm) |
| Civil Court Protection | Not codified | Civil court bar (S.132E) + good faith immunity (S.132F) — mirrors SEBI framework |
| Supersession | Not codified | S.132H: Central Govt may supersede NFRA (max 6 months); Parliament informed immediately |
Summary of New Sections 132A–132K:
| New Section | Subject | Key Provision |
|---|---|---|
| 132A | Auditor Registration & Returns | Auditors of NFRA-covered entities must register with NFRA and file prescribed returns. False information: penalty up to ₹50 lakh |
| 132B | NFRA Fund | Dedicated fund for NFRA — fed by registration fees, annual fees, fines, grants, and other receipts |
| 132C | Public Interest Directions | NFRA may issue binding directions in public interest — e.g., directing re-examination of audit work, requiring specific documentation protocols |
| 132D | Formal Inquiries | NFRA may hold formal inquiries and impose penalties after inquiry; professional misconduct definition expanded |
| 132E | Civil Court Bar | Civil courts barred from entertaining suits/proceedings in respect of matters within NFRA's jurisdiction |
| 132F | Good Faith Protection | NFRA members/officers protected from suits/prosecutions for actions done in good faith |
| 132G | Central Govt Policy Directions | Central Government may issue policy directions to NFRA; mirrors SEBI Act Section 16 framework |
| 132H | Supersession | Central Govt may supersede NFRA (max 6 months); Chairperson and Members vacate; Parliament informed |
| 132-I | Annual Report | NFRA to publish an annual report to be laid before Parliament |
| 132J | Audit & Accounts of NFRA | CAG to audit NFRA's accounts |
| 132K | Regulation-making Power | NFRA may make regulations; draft regulations to be published on website for public comment; regulations to be reviewed at least once every 3 years |
18. Auditor Restrictions Expanded — Section 144 (Non-Audit Services)
❌ Current Position
Auditors restricted from providing certain non-audit services to the company they audit — during the audit engagement only.
✅ Proposed Change
Restriction extended to: (1) Company + its holding company + subsidiary — all restricted during audit. (2) New post-audit restriction: continues for 3 years after audit term ends. Firms with diversified service lines must carefully track engagement histories.
19. Auditor Exemption for Certain Companies — New Section 139(12)
⚠️ New Section 139(12) — Exemption from Mandatory Statutory Audit
The Central Government may, by notification, exempt prescribed classes of companies from the mandatory requirement to appoint a statutory auditor under Chapter X. This is aimed primarily at very small companies where the cost of audit exceeds its practical utility. Important: This exemption is not yet active — it requires a separate notification. Until notified, statutory audit remains mandatory for all companies.
20. Director Disqualification — Revised Grounds — Section 164
| Ground | Current Position | Proposed Change |
|---|---|---|
| Non-filing of financials/annual returns | Disqualification triggered after 3 consecutive years of default | Reduced to 2 years |
| Prior service as auditor/valuer etc. | No such disqualification ground | New ground: Person who served as auditor, secretarial auditor, cost auditor, registered valuer, or insolvency professional for the company/holding/subsidiary/associate in preceding 3 years or current FY — disqualified from acting as director |
21. OPC / Small / Dormant Company — Board Meetings Reduced — Section 173(5)
❌ Current Requirement
OPCs, small companies, and dormant companies must hold at least 1 board meeting in each half of the calendar year = minimum 2 meetings per year (with at least 90-day gap between meetings).
✅ Proposed Change
Reduced to only 1 board meeting per calendar year. This cuts the minimum requirement by 50% — significantly reducing procedural overhead for small entities.
22. Valuation Authority — IBBI Designated — Section 247
The Bill formally designates the Insolvency and Bankruptcy Board of India (IBBI) as the Valuation Authority under Section 247 of the Companies Act. This is a landmark step in professionalising valuations in India.
- IBBI (as Valuation Authority) will grant and renew certificates of recognition to valuers' organisations
- All valuations required under the Companies Act must be performed by registered valuers holding valid IBBI-issued registration
- Penalties: Up to ₹10 lakh for registered valuers; up to ₹1 crore for valuer organisations
- Fraud by a valuer: Imprisonment up to 1 year + fine up to ₹25 lakh
- Appeals from Valuation Authority orders go to NCLAT
23. Strike-off Grounds Expanded — Section 248
❌ Current
Company can be struck off for not filing financial statements/annual returns for 3 consecutive years.
✅ Proposed
Grounds for strike-off expanded. Non-filing for 2 years (not 3) sufficient to trigger strike-off proceedings. Consistent with the reduced director disqualification period.
24. Settlement Mechanism — New Section 454C & Appeal Deposit — New Section 454D
| New Section | Provision |
|---|---|
| 454C — Settlement Authority | Establishes a "Specified Authority" for conducting settlement proceedings for contraventions liable for civil penalties. Allows companies to resolve technical defaults through a mediated settlement process — avoiding protracted litigation. |
| 454D — Pre-deposit for Appeals | Any person appealing an order of NFRA, Valuation Authority, or Adjudicating Officer must deposit 10% of the penalty amount before the appeal is entertained. Designed to deter frivolous appeals. |
25. Other Notable Changes
| Section | Change |
|---|---|
| S.4 — Name Reservation Penalty | Penalty for impersonation in name application: changed from "up to ₹1 lakh" to fixed ₹50,000 |
| S.7 — Incorporation Declaration | Now two separate declarations: (b) by director/manager/secretary named in Articles; (ba) by advocate/CA/CMA/CS in practice — but only if such professional was engaged |
| S.26 — Prospectus Penalty | Penalty for prospectus issued in contravention: changed to fixed ₹2 lakh |
| S.77 — Charge Registration | For prescribed class of companies, deadline for charge registration extended from 60 days to 120 days |
| S.88 — Register of Members | New S.88(2A): No notice of any trust (express, implied, or constructive) shall be entered in the register of members or debenture holders |
| S.128 — Books of Account Penalty (Listed) | Contravention of S.128(1) or S.128(5): Listed company ₹20 lakh; others ₹5 lakh (increased from existing limits) |
| S.131 — Voluntary Revision of Accounts | "Three preceding financial years" clarified to "three immediately preceding financial years" |
| KMP Resignation Framework | Formal framework for KMP resignations — Board must notify ROC; if Board fails, KMP may directly notify ROC with reasons. Event-based disclosure replaces annual blanket disclosures for directors' interests. |
⚖️ Decriminalisation — Key Penalty Changes at a Glance
| Provision | Old Penalty | New Penalty |
|---|---|---|
| S.68 Buy-back default — Company | Fine ₹1L–₹3L | Listed: ₹25L | Unlisted: ₹2L |
| S.68 Buy-back default — Officer | Fine ₹1L–₹3L | Listed: ₹5L | Unlisted: ₹2L |
| S.96 AGM default — Company | Fine up to ₹1L + ₹5K/day | ₹1L + ₹5K/day (max ₹2L) |
| S.96 AGM default — Officer | Fine up to ₹1L + ₹5K/day | ₹1L + ₹5K/day (max ₹50K) |
| S.128 Books of Account — General | Fine ₹50K–₹5L | Listed: ₹5L | Others: ₹50K |
| S.128 Books — S.128(1)/(5) contravention | No separate provision | Listed: ₹20L | Others: ₹5L |
| NFRA order non-compliance — Individual | No specific criminal provision | Imprisonment up to 6 months OR fine ₹1L–₹5L |
| NFRA order non-compliance — Firm | No specific criminal provision | Fine ₹5L–₹25L |
👥 Who Is Affected — Stakeholder Impact Analysis
| Stakeholder | Key Impact | Action Required |
|---|---|---|
| 🏢 Mid-sized Companies (near ₹10–20Cr capital / ₹100–200Cr turnover) | May qualify as "small company" — reduced compliances, lower penalties, MGT-7A | Monitor commencement notification; reassess compliance obligations on enactment |
| 📊 Listed Companies | Higher buy-back penalties; expanded employee compensation schemes; AGM flexibility | Review buy-back policies; update employee compensation scheme documentation |
| 🔍 CA Firms / Audit Firms | Mandatory NFRA registration; returns filing; 3-year post-audit non-audit service restriction; stronger NFRA enforcement | Prepare for NFRA registration; map client engagements; review non-audit services |
| 🏦 GIFT City / IFSC Entities | Comprehensive foreign currency framework for both companies and LLPs | Plan INR → foreign currency conversion; update books/systems |
| 🏛️ AIF Trusts (SEBI/IFSCA) | First-ever statutory option to convert to LLP structure | Evaluate structural benefits; obtain ¾ investor consent before conversion |
| ⚖️ Registered Valuers | IBBI now Valuation Authority; higher penalties; LLP valuations also covered | Ensure valid IBBI registration; comply with new disciplinary framework |
| 👤 Directors | New disqualification ground (prior auditor/valuer role); non-filing period reduced 3→2 years | Check disqualification eligibility; ensure companies file financial statements on time |
| 🏗️ OPCs / Small / Dormant Cos. | Board meetings reduced from 2 to 1 per year; potential audit exemption via S.139(12) | Update board meeting calendar; await S.139(12) notification for audit exemption |
❓ Frequently Asked Questions
📝 Bottom Line
The Corporate Laws (Amendment) Bill, 2026 is a transformative piece of legislation that touches virtually every aspect of Indian corporate and LLP law. Its three overarching themes are: (1) Ease of business — doubling small company thresholds, enabling virtual AGMs, reducing OPC board meeting requirements, introducing trust-to-LLP conversion; (2) Strengthening oversight — transforming NFRA into a full-fledged body corporate, mandatory auditor registration, expanded auditor restrictions, IBBI as Valuation Authority; and (3) GIFT City/IFSC enablement — comprehensive foreign currency framework for both IFSC companies and LLPs. Companies, audit firms, valuers, and legal professionals should monitor the JPC recommendations and commencement notifications closely to time their compliance actions appropriately.
Source: Corporate Laws (Amendment) Bill, 2026 — Bill No. 85 of 2026, as introduced in Lok Sabha. Available at prsindia.org. PRS Legislative Research summary. This article is for informational and educational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for specific compliance guidance.
