The Corporate Laws (Amendment) Bill, 2026 introduced in the Lok Sabha on March 23, 2026, and immediately referred to a Joint Parliamentary Committee, proposes amendments across multiple sections of the Companies Act, 2013, and the Limited Liability Partnership Act, 2008. The bill aims at fostering ease of doing business while simultaneously strengthening regulatory oversight.
Broadly, the Bill aims to reduce compliance burden by decriminalising procedural offences through a civil penalty framework and exempting companies with net profit below INR 10 crore from CSR obligations, while strengthening governance through expanded NFRA and IBBI oversight, thereby balancing business facilitation with investor protection.
Akash Chauhan, partner at CMS INDUSLAW said, “The rationalisation in the Fast Track merger process, the decriminalisation of multiple sections to civil penalty and also giving strength to the National Financial Reporting Authority with greater investigative authority are just indicative measures which reveal the balanced intent of the Government.”
“The Corporate Laws Amendment Bill reflects a clear attempt to balance ease of doing business with regulatory oversight. Decriminalisation and e-adjudication will likely reduce compliance burden and allow boards to focus on substantive governance rather than procedural lapses,” said Hardeep Sachdeva, senior partner, AZB & Partners.
More Muscle to NFRA
Under proposed sections 132A to 132K, NFRA is redesignated as a body corporate with powers to sue and be sued, issue binding directions in public and investor interest, impose penalties after formal inquiries, operate an independent NFRA Fund, and exercise full rule-making authority. Civil court jurisdiction over matters within NFRA’s domain is expressly limited, strengthening its quasi-judicial status.
“The Bill not only seeks to expand NFRA’s reach to more corporate bodies, but also gives it stronger powers to issue directions, call for filings, impose penalties and enforce compliance, thereby increasing pressure on auditors and audit firms,” said Rohit Jain, managing partner, Singhania & Co..
“This would certainly raise the quality threshold for financial reporting and audit scrutiny. More importantly, the Bill separately requires the Board to respond to adverse auditor remarks and disclose departures from Audit Committee recommendations,” Jain added.
Yet whether NFRA’s expanded mandate translates into real board accountability remains contested.
“NFRA in its present proposed form will regulate the profession of chartered accountancy, auditors and assist the central government to set accounting standards. Boards’ accountability will certainly increase towards the auditors as per the new regime regulating the auditors themselves,” said Akshat Pande, managing partner, Alpha Partners.
“NFRA’s enhanced powers target auditors, not directors; the Bill does not sharpen personal liability or enforcement against boards for governance failures, beyond incremental disclosure and reporting obligations,” noted Varij Sharma, partner & co-founder, Gravitas Legal.
“Expanding NFRA’s role does not directly increase board liability, but it does sharpen accountability indirectly. Boards will now have to justify audit decisions and disclosures more transparently, which raises governance standards without formally raising liability thresholds,” said Raheel Patel, partner, Gandhi Law Associates.
IBBI‘s New Role in Valuations
Alongside NFRA, the Bill formally positions the Insolvency and Bankruptcy Board of India as the Valuation Authority under section 247 of the companies act, with oversight over value registration, discipline and regulation. All valuations under the Companies Act will be conducted by IBBI-registered valuers, creating a standardised valuation-to-audit pipeline.
“Giving IBBI a formal role in valuation oversight is a logical step and should bring consistency. The risk is not the authority itself, but regulatory layering; if standards and processes are not streamlined, transaction timelines could slow,” noted Patel.
“Expanding NFRA’s jurisdiction and empowering IBBI could strengthen accountability and valuation standards, but may also create overlapping regulatory layers if not clearly delineated,” said Sachdeva.
Decriminalisation of minor offences
One of the Bill’s most broadly welcomed reforms is the conversion of procedural criminal offences into civil penalties administered through an e-adjudication framework. The Bill moves many minor offences, including delayed filings and disclosure lapses, from criminal courts and the NCLT to an online penalty regime.
Under decriminalised provisions of Section 186, companies face a civil penalty of INR 1 lakh with INR 500 per day for continuing default, capped at INR 5 lakh, while officers face INR 25,000 plus INR 200 per day, capped at INR 1 lakh.
“Delayed filings etc. now become online, standardised penalties handled by secretarial/CFO teams, not board crises with show-cause notices or court dates. No prosecution risk lets boards delegate payments via existing matrices,” explains Sharma.
“These amendments are an indicator towards the intent of the Government to focus on more serious issues rather than trivial matters and provides for a quick disposal of such matters which shall definitely provide the Board members more time to judiciously channelise their resources,” said Chauhan.
Hiking CSR threshold
The Bill doubles the net profit threshold for mandatory CSR compliance from INR 5 crore to INR 10 crore, or such higher sum as may be prescribed. The net worth (INR 500 crore) and turnover (INR 1,000 crore) thresholds remain unchanged. Also, the timeline for transferring unspent CSR amounts relating to ongoing projects is extended from 30 days to 90 days, from the end of the financial year to June 29. Companies meeting prescribed conditions may be entirely exempted from CSR obligations.
Sharada Ramachandra, partner, Cyril Amarchand Mangaldas said, “Whilst the net profit threshold has been doubled, it is pertinent to note that the net worth and turnover thresholds for CSR compliance remain unchanged, which will ensure continued CSR/ESG accountability for companies with significant financial positions. The increase in the net profit threshold and the residual flexibility to exclude other classes of companies is only reflective of the overall theme of the bill to ease compliance burden on smaller companies.”
“Companies of smaller size having 5-10 cr profit contribute a maximum of 20 lacs per entity, which is not much. But the exemption thereof will result in largely reducing compliance burden,” noted Pande.
Chauhan noted, “Government believes that in the long-term small or midsized companies shall also be profitable. Thus, this relaxation, as we may call it for the CSR threshold, may have a short-term impact on lower spending on ESG. ESG is an essential concept for a sustainable business environment and therefore the Government may keep track of the CSR-ESG correlation.”
While experts agree that increasing the CSR threshold is a welcome step towards easing compliance burden, concerns related to ESG accountability run parallel.
“Raising CSR thresholds may ease compliance for smaller companies but could dilute ESG accountability over time,” noted Sachdeva. While Patel said “Raising CSR thresholds will reduce compliance for mid-sized companies, but it also narrows the base of companies engaging with ESG at a board level. Over time, that could dilute the culture of accountability rather than strengthen it.”
“As may be prescribed”
In India’s corporate governance story, the rules that follow the law have always mattered as much as the law itself. Perhaps the worrying aspect of the Bill is the liberal use of “as may be prescribed” delegations throughout the text. Many core elements including CSR thresholds, company classification for exemptions, auditor carve-outs, and buy-back limits are left to subordinate legislation. NFRA’s new Sections 132A to 132K use vague phrases such as “public interest” and “other persons concerned,” which according to experts, invite enforcement unpredictability.
“Wide “as may be prescribed” levers risk skeletal legislation,” said Sharma. “New Sections 132A–132K grant NFRA its fund, rule-making, “public interest” directions, inquiries/penalties, and civil-court bars. Vague terms like “public interest” or “other persons concerned” invite discretion worries in enforcement/debarments.”
“”Fit and proper” director criteria, CSR/auditor exemptions, and IBBI’s valuation standards/processes are rule-bound, letting government/regulators tweak norms post-passage without Parliament—potentially broadening scope or altering deal/restructuring dynamics,” Sharma added. “Overall, the Bill simplifies rules but shifts substantive policy to executive/regulators, amplifying discretion via future rules/circulars.”
“The text of the new law has used ‘as may be prescribed’ provisions a number of times, thereby leaving a lot to be prescribed by the executive through rules. Given the prior experience, we can only hope that rules will be drafted with clarity and consequence in mind and not create another era of constant confusion and amendments,” says Pande.
“Several key aspects are left to be ‘prescribed,’ and the Central Government retains significant policy-direction powers over regulators, which could widen discretion depending on how rules are framed,” noted Patel.
“The intent is progressive, but its effectiveness will depend on how cohesively the regulatory framework is implemented,” concluded Sachdeva.
