Corporate Laws (Amendment) Bill 2026: Govt Proposes Decriminalising Minor Comapanies Act Defaults, CSR Changes
Kirit Singhania
24 March 2026 9:21 AM IST
The Corporate Laws (Amendment) Bill, 2026, was introduced in the Lok Sabha on Monday, proposing changes to the Companies Act, 2013, and the Limited Liability Partnership Act, 2008, that would remove criminal liability for several procedural violations, revise penalty provisions, and give wider statutory powers to regulators.
One of the central proposals in the bill is to move a number of compliance-related offenses out of the criminal framework. At present, certain technical defaults can lead to prosecution before courts. The amendments seek to bring many such violations within an adjudication mechanism where monetary penalties may be imposed instead of criminal action.
Several provisions of the Companies Act are being recast for this purpose, including Section 40, Section 128, and Section 147.
Under the proposed change to Section 40, which deals with issue of securities, failure to comply with the provision would attract a penalty of Rs 25 lakh on the company and Rs 2 lakh on the officer in default.
Section 128, relating to maintenance of books of account, is also being modified. The Bill provides for a penalty of Rs 5 lakh in the case of listed companies and Rs 50,000 for other companies, with higher penalties where the contravention concerns core requirements of the provision.
Amendments to Section 147 introduce capped penalties for certain auditor-related defaults, fixing the upper limit at Rs 5 lakh for companies and Rs 1 lakh for officers, apart from additional amounts in case the default continues.
Changes have also been proposed to Section 135 on Corporate Social Responsibility. The threshold for applicability is proposed to be raised from Rs 5 crore net profit to Rs 10 crore, with power given to prescribe a higher amount. The period for transferring unspent CSR funds is proposed to be extended from 30 days to 90 days. At the same time, the maximum penalty for non-compliance has been increased to Rs 1 crore, and the central government has been empowered to exempt specified classes of companies from CSR obligations.
The bill makes substantial additions to the framework governing the National Financial Reporting Authority. Amendments to Section 132, along with insertion of new provisions from Sections 132A to 132K, set out the authority's powers in greater detail. These include the power to call for information, issue directions to auditors, conduct inquiries, impose penalties, and frame regulations for the discharge of its functions. The amendments also clarify that the authority will function as a body corporate and lay down the procedure for enforcement and appeals.
The Bill also enables conversion of specified trusts into LLPs through Section 57A and introduces a framework for IFSC-based LLPs to operate in foreign currency, aligning with global financial systems.
Currently, the Bill has been referred to the Joint Parliamentary Committee for recommendations and suggestions.