Background
The Corporate Laws (Amendment) Bill, 2026 (“the Bill”) has been introduced in the Lok Sabha on March 23, 2026, proposing extensive amendments to the Companies Act, 2013 (“the Cos Act”). The Bill introduces a series of focused amendments to the Cos Act, aimed at promoting ease of doing business while reinforcing governance standards. Some of the important amendments include relaxation in audit requirements, rationalizing the shareholders and creditors approval threshold for fast-track mergers, increasing the number of buybacks permissible in a year, streamlining directorship provisions, etc. The key changes introduced pursuant to the above are discussed in this Blog
Key highlights of the amendment
| Particulars | Current provisions | Proposed amendment |
| A. Scheme of Compromises, Arrangements and Mergers | ||
| Fast-track merger | Shareholders and creditors approval Currently, fast-track mergers require approval of members holding at least 90% of the total number of shares. Such threshold was computed based on the total shareholding and not just based on those members who attended the meeting and participated in the voting process. This posed a challenge for listed companies, who were otherwise eligible for fast-track mergers, since obtaining 90% approval from members proved to be difficult. Therefore, listed companies could only use the National Company Law Tribunal (“NCLT”) route for mergers or demergers. Approval from Official Liquidator One of the steps to be undertaken in a scheme eligible under the fast-track route is obtaining the approval of the Official Liquidator. | Shareholders and creditors approval The approval threshold for fast-track mergers has been proposed to be modified as “majority in number and at least 75% in value held by members present and voting”. Similarly, the creditor approval requirement has been reduced from 90% in value to 75% in value, making the process more practical and achievable. It is to be noted that unlike the case of members, the language “present and voting” is not proposed to be inserted for creditors. Therefore, the aforesaid thresholds should be computed based on the total value of the creditors. The proposed amendment would enable listed companies to participate in the fast-track merger or demerger process. However, it is to be noted that fast-track demergers may not be eligible for tax-neutrality. Approval from official liquidator It has been clarified that filing of the scheme with the Official Liquidator is no longer required in cases involving transfer or division of an undertaking. This amendment is based on the rationale that, in the case of a division, the undertaking continues to exist, thereby eliminating the need for such filing with the Official Liquidator. |
| NCLT approval for merger of companies | Currently, if the transferor and transferee company in a scheme of merger are located in multiple jurisdictions, such companies would have to obtain approval from the NCLT from each such jurisdiction for a scheme of merger under Section 230 to Section 233. This resulted in significant delays in obtaining the approval for the scheme. | As per the proposed amendment, merger application can be filed before a single bench of the NCLT having jurisdiction over the transferee company thereby simplifying and expediting the approval process. Given that the order will be issued by the NCLT having jurisdiction over the transferee company, the stamp duty as prevalent in the state where the transferee company is located would prevail. |
| B. Share issuances and buybacks | ||
| Increased flexibility in buyback of shares | Currently, buyback is restricted to 25% of the aggregate of paid-up capital, free reserves, and securities premium of the company. If a buyback is undertaken in a year, another buyback cannot be undertaken until one year from the closure of the first buyback. A declaration of solvency is required to be submitted by the directors to the Registrar in the form of an affidavit. | It is now proposed that a different limit may be prescribed for certain classes of companies. Though the class of companies is not yet prescribed, this would provide greater flexibility and would allow higher capital returns. It is proposed that certain classes of companies, especially debt-free companies, may be allowed to make another buyback offer within one year from the date of the closure of first buyback. However, there should be a minimum gap of six months between the closure of the first buyback and the opening of the second buyback. This amendment will allow companies for increased distribution of surplus cash. It is now proposed to remove the requirement to be in the form of an affidavit. |
| Recognition of employee compensation instruments | Currently, the Cos Act is silent regarding share-linked benefits for employees such as Stock Appreciation Rights (“SARs”) and Restricted Stock Units (“RSUs”) which are prevalent in other countries. | In addition to the Employee Stock Option Plans (ESOPs), the Cos Act has formally recognized SARs and RSUs by amending the following sections by referring to them as “or such other scheme linked to the value of the share capital of a company”: Section 62 – To provide a mechanism for issue of employee compensation instruments through passing of special resolution by the company. Section 42 – To exclude SAR & RSU holders while counting the number of allottees in a financial year for private placement limit of 200 persons. Section 68 – To allow the companies to buyback such SARs and RSUs from the instrument holders to whom they were issued earlier. However, it shall be noted that Section 53 of the Cos Act prohibits the issue of shares at a discount (i.e., at a price below face value). Accordingly, Section 53 may also have to be amended to provide clarification in this regard. |
| Clarification regarding trust as a member | Under the Companies Act, 1956, it was expressly stated that trusts were not permitted to be recorded as members in the register of members, as a trust is not a separate legal entity & hence cannot hold shares in its own name. This explicit restriction was omitted in the Cos Act. Although the beneficial ownership framework under the current provisions enables identification of the ultimate beneficial owner, the absence of an express provision resulted in differing interpretations on whether trusts could hold shares in their own name as registered members. | It is proposed that the earlier restriction as prevalent under Companies Act, 1956 i.e., trust cannot be a registered member, shall be reinstated. Accordingly, shares held for the benefit of a trust will need to be registered in the name of an identifiable legal person (such as trustees). |
| C. Procedural relaxations | ||
| Enhanced ceiling limits for qualifications as small company | As per the current provisions of the Cos Act, the threshold for qualifying as a small company is as follows: The paid-up share capital (‘PUSC’) is lesser than or equal to ₹10 crores and Turnover is lesser than or equal to ₹100 crores. Further, the following companies would not qualify as small companies: Holding company or subsidiary company Section 8 company Company or body corporate governed by any special Act | The statutory ceiling limits for classification as a small company have been enhanced as follows: The PUSC ceiling has been increased from ₹10 crores to ₹20 crores, and Turnover ceiling has been increased from ₹100 crores to ₹200 crores. Though the proposed amendment enhances the ceiling limits, a large number of private companies do not qualify as small companies since holding or subsidiary companies are excluded from the definition of a small company. There has not been any amendment made to exclude such holding or subsidiary companies. |
| Relaxation in thresholds for Corporate Social Responsibility (“CSR”) | The net profit threshold for applicability of CSR provisions is currently ₹5 crores. The time limit for transfer of unspent CSR amounts is 30 days from the end of the Financial Year (“FY”). The existing relaxation from constituting a CSR Committee, available where the minimum CSR expenditure is not more than ₹50 lakhs. | The net profit threshold is proposed to be increased to ₹10 crores. The time limit is proposed to be extended to 90 days from the end of the FY i.e., the revised due date shall be 29th June each year. The aforesaid relaxation is proposed to be increased to ₹1 crore. Accordingly, companies with minimum CSR obligation up to ₹1 crore may discharge their CSR functions through the Board of Directors without being required to constitute a CSR Committee. Further, a sub section is proposed to be inserted allowing certain classes of companies to be exempt from CSR compliance, as may be prescribed. These relaxations shall reduce the compliances of smaller companies and grant exemption from CSR responsibilities to some companies. |
| Exemption from mandatory audit requirement | Under the Cos Act, all companies, including small companies, are mandated to appoint a statutory auditor and get their books of accounts audited on an annual basis. | It is now proposed that certain prescribed classes of companies need not appoint auditors and conduct audit, subject to satisfaction of prescribed conditions. Although the specific classes of companies and conditions for exemption are yet to be notified, this amendment is intended to ease compliance and administrative burden for eligible companies (likely small companies). |
| D. Directorship, meetings and powers of directors | ||
| Loans to entities in which directors are interested | Under the existing provisions, certain companies are restricted from granting loans to a firm in which a director of the company or their relative is a partner, unless special resolution is passed. | The proposed amendment expands this restriction to include Limited Liability Partnerships (LLPs) in which a director of the company or their relative is a partner. Therefore, certain companies cannot grant loans to a firm or an LLP in which a director is a partner of such firm or LLP, unless special resolution is passed. |
| Frequency of board meetings | For one person companies, small companies and dormant companies, the frequency of board meetings is at-least 1 board meeting in each half of the calendar year, with a minimum gap of more than 90 days between the 2 meetings. | It is proposed that the aforesaid companies can have 1 board meeting in a calendar year. The reduction in the frequency of Board meetings eases compliance requirements and lowers administrative costs. |
| Independent Director | The current provision in the Cos Act provides a person can hold the position of independent director for a maximum period of 5 consecutive years. Further, that there should be a cooling off period of 3 years before a person can be reappointed as independent director . During such cooling off period, the independent director shall not be appointed in or be associated with the company in any other capacity. Further, the Cos Act provides that any person cannot be appointed as an independent director if such person is an employee or key managerial personnel in any of the three financial years immediately preceding the year of appointment. The threshold for transactions with a legal or consulting firm whose employee, partner, or proprietor is proposed to be appointed as an independent director was “10% or more of the gross turnover of such firm”. | The proposed amendment expands the restriction to state that the independent director should not have been associated with even the holding or subsidiary or associate company during the cooling off period. Also, the calculation of independent director tenure shall also include the period in which he has served as the additional director of the company as well. The proposed amendment expands the restriction to state that such person cannot be appointed as an independent director if such person is an employee or key managerial personnel in the year of appointment as well. It is proposed to revise such limits to “10% or such lower percentage as may be prescribed” of the gross turnover of such firm. |
| Additional director, Alternate director and Casual vacancy director | The tenure of an Additional Director is from date of appointment to the date of the next Annual General Meeting (“AGM”). | As per the proposed amendment, the tenure is up to the date of the next general meeting or three months from the date of appointment, whichever is earlier. Therefore, the company may have to hold an Extra General Meeting (EGM) within 3 months of appointment of additional director (if AGM doesn’t fall in next 3 months) for re-appointment, failing which the office will fall vacant. Further, it is proposed that a person who has been rejected to be appointed as a director in a general meeting cannot also be appointed by the board as Additional Director / Alternate Director / Casual vacancy director, without prior approval of shareholders. |
| Disqualification of a director | The current provisions contain a list of disqualifications for a person to be appointed or reappointed as a director. Where a director incurs disqualification, the director is required to vacate office in the non-defaulting companies, and no explicit timeline was prescribed. | In addition to the existing disqualification provisions, the following disqualifications have been introduced: If a person has been an auditor or a secretarial auditor or a cost auditor or a registered valuer or an insolvency professional of the company or its holding, subsidiary or associate company during the immediately preceding three financial years or during the current financial year. If a person is not considered as “fit and proper” by the board. If the financial statements/ annual returns of a company are not filed for a period of two consecutive years (period of three consecutive periods as per the earlier provisions) Where a director incurs disqualification, the amended provision now requires vacation of office in all companies, including the defaulting company, within six months from the date of disqualification or upon expiry of tenure, whichever is earlier. |
| Other changes | There is currently no procedure specified for resignation of a whole-time key managerial personnel who is not a director. | A new section is proposed to be inserted which states that a whole-time key managerial personnel (who is not a director) may resign by submitting a written notice to the company. Upon receipt, the Board shall take note of the resignation and intimate the Registrar in the prescribed form, manner, and within the prescribed timeline. |
| E. Closure of Companies | ||
| Strike-Off of Companies | The following are the grounds for applying for strike off of companies as per the existing provisions: Fails to commence business within one year Does not carry on business or operations for preceding two financial yearsSubscribers have not paid initial subscription amount and INC-20A has not been filed within 180 days from incorporationCompany is not carrying on any business or operations as revealed after physical verification carried on by the Registrar of Companies (ROC) | An additional ground has been introduced for striking off the name of a company. Under the proposed amendment, a company may now be struck off if it has not carried out any significant accounting transaction[1] during the preceding two financial years as well as the current financial year, or if it has failed to file its financial statements or annual returns for two consecutive financial years preceding the previous financial year. This aims to facilitate the removal of non-compliant and dormant companies from the register. |
| Summary procedure for liquidation | Section 361 of the Cos Act provides for a summary liquidation procedure for certain classes of companies, wherein the role of NCLT is replaced by Central Government (“CG”): having a book value of assets upto 1 crore andbelonging to such classes of companies as may be prescribed. The prescribed class of companies includes those which, as per their latest audited financial statements, meet any of the following thresholds: total outstanding deposits upto ₹25 lakhs ortotal outstanding loans upto ₹50 lakhs orturnover upto ₹50 crores orpaid up share capital upto ₹1 crore Further, the CG is required to appoint the liquidator of the company. | It is now proposed to substitute the word “and” with “or” such that the fulfillment of any one condition shall be sufficient to come under this framework. Therefore, if a company has book value of assets up to 1 crore, it can be wound up with the approval of the Regional Director and need not approach the NCLT. It is also proposed that the summary procedure for liquidation shall not apply in cases of fraud or misconduct or misfeasance. The amendment seeks to provide that the CG may appoint either an Official Liquidator or an insolvency professional registered under the Insolvency and Bankruptcy Code, 2016 as the liquidator, which would improve efficiency and speed. |
| Appeal against orders passed by the CG | Currently, there is no appeal mechanism prescribed for orders passed by the CG in relation to dissolution or against orders passed by the Valuation Authority. | The proposed amendment provides that any person aggrieved by an order of dissolution issued by the Central Government may file an appeal before the National Company Law Appellate Tribunal (“NCLAT”) within 45 days from the date of receipt of such order. It is proposed to expand the jurisdiction of the NCLAT to include appeals against orders passed by the Valuation Authority. |
| F. Other amendments | ||
| IFSCs to issue share capital and maintain books of accounts in permitted foreign currency | Presently, the Cos Act does not include specific provisions to enable companies to prepare accounts or financial statements in foreign currencies. However, the International Financial Services Centre regulations require preparation of balance sheet in foreign currency. Further, there is no provision dealing with issuance of share capital by an IFSC in foreign currency. | Such companies will also be required to prepare and maintain their books of account, financial statements, and other records in the permitted foreign currency. A relaxation has also been proposed whereby companies may present their financial statements in INR, if permitted by the relevant IFSC authority. The proposed amendment also provides that companies incorporated in IFSCs shall issue and maintain their share capital in a permitted foreign currency. Existing companies will be required to convert their share capital from INR into a permitted foreign currency within such time and in such manner as may be specified by the IFSC authority, in consultation with the CG. It is, however clarified that fees, fines and penalties under the Cos Act shall continue to be payable in INR. Taking into account the nature of companies set up in International Financial Services Centre (IFSC) jurisdiction, such provisions are proposed to be included through a new section. |
| Delegation of Powers | Restoration application Prior to this amendment, an application for restoration of a company was required to be filed before the NCLT, which often involved a relatively time-consuming process. Threshold increased for Compounding to Regional Director Earlier, the power to compound offences was primarily with NCLT, leading to procedural delays and increased burden. Central Government to appoint RD/ARD/JRD/DR Prior to this amendment, there was limited express provision enabling delegation of powers by the Central Government to its officers. | Restoration application Under the amended provisions, such applications can now be filed before the Regional Director instead of the NCLT, thereby streamlining the process. Threshold increased for Compounding to Regional Director The amendment now authorizes the Regional Director to compound offences involving a fine up to ₹1 crore. Central Government to appoint RD/ARD/JRD/DR The proposed amendment empowers the Central Government to appoint officers such as Regional Directors, Additional Regional Directors, Joint Regional Directors, and Deputy Regional Directors for the discharge of functions under the Cos Act. However, their duties have not yet been prescribed. |
| Appealagainst the decision of Registrar | In the current provisions, there is no explicit recourse available against decisions of the Registrar relating to incorporation and name reservation, in case of rejection or disputes. | The proposed amendment now provides that an appeal can be filed against the Registrar’s decisions in matters relating to incorporation and reservation of name to an officer not below the rank of Joint Director. |
| Recovery of Amounts by Recovery Officer | Currently, there is no provision for recovery proceedings in case a person fails to pay the penalty imposed under the Cos Act. | The proposed amendment provides that where a person fails to pay the penalty imposed under the Cos Act, the Recovery Officer may initiate recovery proceedings. Such proceedings may include measures such as attachment and sale of movable or immovable property, attachment of bank accounts, arrest and detention of the person, or appointment of a receiver for the management of properties. |
| Settlement of certain contraventions | Currently, there is no mechanism enabling a person to seek settlement of defaults when proceedings have been initiated against the company by the concerned officers on a voluntary basis. | The amendment now permits a person to apply for settlement of proceedings before the penalty order is passed, thereby providing an opportunity for early resolution. A Specified Authority, as appointed by the Central Government, may consider and accept such settlement applications after evaluating the nature and gravity of the default, subject to prescribed terms and conditions. In cases where the settlement application is rejected, the proceedings shall continue in accordance with the provisions of the Cos Act, and no appeal shall lie against the order of settlement. This amendment aims to promote ease of compliance and encourage voluntary resolution of default. |
| Penalty appeal: 10% deposit required | As per the existing provisions, there was no requirement for pre-deposit of penalty amounts before filing an appeal with Regional Director. | The amendment now provides that no appeal against penalty orders passed by the National Financial Reporting Authority (NFRA), the Valuation Authority, or an Adjudicating Officer shall be admitted by the NCLT or the Regional Director unless the appellant deposits at least 10% of the penalty amount. This condition discourages against unnecessary litigation, ensures seriousness in filing appeals and quicker recovery of penalties. |
Frequently asked Questions
What is the Corporate Laws (Amendment) Bill, 2026?
The Corporate Laws (Amendment) Bill, 2026 was introduced in the Lok Sabha on March 23, 2026. It proposes extensive amendments to the Companies Act, 2013, aimed at promoting ease of doing business, relaxing compliance requirements for smaller companies, and reinforcing corporate governance standards.
What is the new approval threshold for fast-track mergers under the 2026 amendment?
The Bill proposes to reduce the shareholder approval threshold from 90% of total shares to a majority in number and at least 75% in value of members present and voting. Similarly, the creditor approval threshold has been reduced from 90% to 75% in value.
Can listed companies now use the fast-track merger route after the 2026 amendment?
Yes. The reduction in approval thresholds to 75% (present and voting) makes it practically feasible for listed companies to undertake fast-track mergers and demergers. Previously, obtaining 90% approval from all members was extremely difficult for listed entities. However, fast-track demergers may not be eligible for tax-neutrality.
How many buybacks can a company undertake in a year under the new rules?
Under the proposed amendment, certain classes of companies especially debt-free companies may be allowed to undertake a second buyback within the same year, subject to a minimum gap of six months between the closure of the first buyback and the opening of the second. Previously, a gap of one full year was mandatory.
What are the revised CSR thresholds under the Corporate Laws Amendment Bill, 2026?
The net profit threshold for CSR applicability has been proposed to increase from ₹5 crores to ₹10 crores. The timeline to transfer unspent CSR amounts has been extended from 30 days to 90 days from the end of the financial year (i.e., by June 29 each year). The threshold for exemption from constituting a CSR Committee has been raised from ₹50 lakhs to ₹1 crore.
Which companies may be exempt from mandatory audit under the 2026 bill?
The Bill proposes that certain prescribed classes of companies — likely small companies — need not appoint a statutory auditor or conduct an annual audit. The specific classes and conditions are yet to be notified by the government.
What is the new definition of a small company under the 2026 amendment?
The paid-up share capital ceiling for small companies has been increased from ₹10 crores to ₹20 crores, and the turnover ceiling from ₹100 crores to ₹200 crores. However, holding companies, subsidiary companies, Section 8 companies, and companies governed by special Acts continue to be excluded from the definition.
What are the new disqualifications introduced for directors under the 2026 bill?
The Bill introduces three new grounds: (1) if the person has been an auditor, secretarial auditor, cost auditor, registered valuer, or insolvency professional of the company or its holding/subsidiary/associate company in the preceding three financial years or the current year; (2) if the person is not considered “fit and proper” by the board; and (3) if the company’s financial statements or annual returns have not been filed for two consecutive years (reduced from three). A disqualified director must now vacate office in all companies within six months.
Are SARs and RSUs now formally recognised under the Companies Act?
Yes. The Bill formally recognises Stock Appreciation Rights (SARs) and Restricted Stock Units (RSUs) by amending Sections 42, 62, and 68 of the Companies Act. These instruments are now referred to as “schemes linked to the value of share capital.” However, an amendment to Section 53 may also be needed to address the prohibition on issuance of shares at a discount.
Can trusts hold shares as registered members under the amended Companies Act?
No. The Bill proposes to reinstate the restriction that was present in the Companies Act, 1956 — trusts cannot be recorded as registered members since a trust is not a separate legal entity. Shares held for the benefit of a trust must be registered in the name of an identifiable legal person, such as the trustees.
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