Corporate Laws Amendment Bill 2026: CSR Threshold and Compliance Changes

The Corporate Laws (Amendment) Bill, 2026, introduced in Lok Sabha on 23 March 2026, proposes sweeping changes to the Companies Act, 2013 and the Limited Liability Partnership (LLP) Act, 2008. The most significant change for small and medium enterprises is the increase of the Corporate Social Responsibility (CSR) mandatory threshold from Rs. 5 crore to Rs. 10 crore net profit. This single amendment exempts thousands of companies from mandatory 2 percent CSR spending obligations. The Bill also decriminalizes 21 offences, converts them to civil penalties, and introduces digital-first compliance mechanisms. If your company's net profit hovers around the current Rs. 5 crore threshold, this legislation fundamentally changes your compliance landscape.

CSR Threshold Doubled: From Rs. 5 Crore to Rs. 10 Crore

The Bill raises the net profit threshold for triggering mandatory CSR obligations from Rs. 5 crore to Rs. 10 crore. This doubling of the threshold exempts mid-market companies from CSR compliance until their profitability reaches the higher benchmark. Currently, companies with net profit above Rs. 5 crore must spend 2 percent of average net profits of the preceding three years on CSR activities. Under the Bill, only companies exceeding Rs. 10 crore net profit face this obligation. The Bill also raises the exemption threshold for constituting a mandatory CSR Committee from Rs. 50 lakh to Rs. 1 crore, reducing administrative overhead for smaller profitable entities.

Extended Timelines for Unspent CSR Amounts

Companies sometimes allocate CSR funds but fail to spend them within a single financial year. Previously, unspent CSR amounts relating to ongoing projects had to be transferred to an Unspent CSR Account within 30 days of the financial year end. The Bill extends this timeline to 90 days, providing companies greater flexibility in managing project timelines and fund deployment. This is particularly helpful for multi-year CSR projects, such as constructing schools or health centers, where expenditure spans multiple financial years. The extended timeline reduces the administrative burden of constantly moving funds between accounts and allows project-based CSR planning without penalty.

Decriminalization of 21 Corporate Offences

Beyond CSR, the Bill decriminalizes 21 offences under the Companies Act and LLP Act. These primarily involve technical violations, such as failure to file documents on time or procedural lapses that do not involve fraud or deliberate wrongdoing. These violations will now attract civil penalties instead of criminal prosecution. Directors and authorized representatives will no longer face criminal liability for administrative oversights. Instead, companies will face monetary fines adjudicated through administrative channels rather than criminal courts. This shift reflects a global trend toward proportionate regulation: not every breach deserves criminal conviction and imprisonment.

Digital Compliance and Electronic Communication

The 2026 amendment reinforces digital-first corporate compliance by mandating that specified classes of companies serve documents and notices to members exclusively through electronic mode. This reduces paper-based administration, accelerates communication, and aligns with global digital governance standards. Companies must ensure robust digital systems and member consent for electronic communication. Prescribed classes of companies will be notified by the Ministry of Corporate Affairs. This provision modernizes company administration, though it creates an obligation to maintain digital communication infrastructure and security.

Planning Your Compliance Strategy

Companies should review their net profit levels to assess CSR obligations under the new threshold. If your company currently has net profit between Rs. 5 and Rs. 10 crore, the Bill frees you from mandatory CSR spending, though you may choose to engage in voluntary CSR for brand and stakeholder reasons. Update your Director Manual and Board policies to reflect the decriminalization of 21 offences, revising internal compliance assessments to categorize violations as administrative rather than criminal. If your company is prescribed for digital-only communication, audit your digital infrastructure for compliance readiness. The Bill is currently under scrutiny by a 31-member Joint Parliamentary Committee, which will submit its report by the monsoon session. The final version may include modifications, so track the JPC deliberations and prepare for potential further amendments.