Corporate Laws Amendment Bill 2026: 107 Clauses Changing Companies Act and LLP Act

The Corporate Laws (Amendment) Bill, 2026, introduced in Lok Sabha on March 23, 2026, proposes sweeping changes to both the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. With 107 clauses, this is one of the most comprehensive corporate law reform exercises since the Companies Act itself was enacted. The Bill has been referred to a Joint Parliamentary Committee for detailed examination. Key themes include decriminalisation of minor offences, expansion of the National Financial Reporting Authority's powers, designation of the Insolvency and Bankruptcy Board of India as the Valuation Authority, and simplification of merger and scheme procedures. This article examines the major changes proposed and their implications for companies, LLPs, and their directors.

Decriminalisation of Corporate Offences Under the Bill

The Bill continues the government's policy of decriminalising minor procedural defaults under the Companies Act. Several offences that currently attract criminal prosecution and imprisonment are proposed to be converted into civil defaults attracting monetary penalties adjudicated by the Registrar of Companies or other designated officers. This shift from criminal to civil enforcement is intended to reduce the burden on criminal courts, speed up adjudication, and ensure that genuine procedural lapses are not treated at par with fraud. The Bill identifies categories of defaults based on severity: compoundable offences with penalties below a specified threshold will become civil defaults, while offences involving fraud, misrepresentation, or harm to public interest will retain criminal liability. Directors and officers will still face personal criminal liability for serious misconduct, including fraudulent financial reporting, related-party transactions without disclosure, and misuse of company funds. The decriminalisation applies equally to LLPs under the amended LLP Act provisions.

NFRA Powers Expanded and IBBI as Valuation Authority

The National Financial Reporting Authority, established under Section 132 of the Companies Act, 2013, is proposed to receive significantly expanded jurisdiction. Currently, NFRA's oversight is limited to auditors and audit firms of certain classes of companies. The Bill proposes to extend NFRA's disciplinary authority to cover all chartered accountants and cost accountants in practice, not just those auditing listed or large companies. NFRA will also gain the power to set auditing and accounting standards, a function currently split between ICAI and the government. Separately, the Bill designates the Insolvency and Bankruptcy Board of India as the sole Valuation Authority for registered valuers. IBBI will regulate the registration, conduct, and disciplinary proceedings of valuers across all sectors. This consolidation replaces the fragmented oversight that currently exists, where valuers operate under multiple regulatory bodies depending on the asset class being valued. The move is expected to bring consistency to valuation practices, particularly in insolvency proceedings where valuation disputes have caused significant delays.

Changes to Merger and Scheme Approval Procedures

The Bill proposes to streamline the process for mergers, demergers, and schemes of arrangement under Sections 230 to 234 of the Companies Act. Currently, schemes require approval from the National Company Law Tribunal, which involves multiple hearings, notices to creditors and shareholders, and reports from official liquidators. The proposed amendments introduce a fast-track approval mechanism for schemes below a specified threshold and for mergers between wholly-owned subsidiaries and holding companies. The NCLT's role in routine schemes is reduced, with the central government empowered to approve certain categories of schemes through an administrative process. However, schemes involving listed companies, cross-border mergers, or those attracting objections from a specified percentage of creditors or shareholders will continue to require NCLT approval. The Bill also introduces mandatory timelines for each stage of the scheme process, addressing the criticism that NCLT delays have made India's merger approval process slower than comparable jurisdictions.

LLP Act Amendments and JPC Referral

The LLP Act, 2008, receives substantial amendments through this Bill. Key changes include introduction of provisions for small LLPs with reduced compliance requirements, a framework for conversion of LLPs into companies and vice versa with simplified procedures, and alignment of LLP financial reporting requirements with those applicable to companies. The Bill also introduces a concept of significant beneficial ownership for LLPs, requiring disclosure of individuals who hold or exercise significant influence or control, mirroring the beneficial ownership provisions already applicable to companies under Section 90 of the Companies Act. The referral of the entire Bill to a Joint Parliamentary Committee signals that Parliament expects detailed scrutiny before passage. The JPC will examine each of the 107 clauses, take evidence from stakeholders including industry bodies, professional institutes, and regulators, and submit its report with recommendations. Given the scope of the Bill, the JPC process is expected to take several months.

Key Takeaways for Companies and Directors

The Corporate Laws Amendment Bill 2026 represents a significant modernisation of India's corporate governance framework. The decriminalisation of minor defaults will reduce compliance anxiety for directors of small and medium companies, while retaining deterrence for serious misconduct. The expansion of NFRA's jurisdiction will create a single, powerful audit oversight body, which should improve audit quality across the profession. IBBI's designation as Valuation Authority consolidates an important regulatory function. The streamlined merger process will benefit companies seeking to restructure, though listed companies will still face the full NCLT process. Companies and LLPs should monitor the JPC proceedings closely, as the final legislation may differ from the Bill as introduced. Directors should particularly watch for changes to the penalty framework, as the shift from criminal to civil enforcement will alter the risk calculus for compliance decisions.