[Analysis] Corporate Laws (Amendment) Bill 2026 | Key Proposed Changes to Companies Act & LLP Act

Finance Bill 2026 Amendments refer to the changes, revisions, and additions made to the provisions of the Finance Bill, 2026, during the legislative process, particularly at the stage when it was passed by the Lok Sabha. These amendments modify the originally proposed provisions to reflect parliamentary review, policy refinements, and practical considerations. They may involve changes to tax rates, the scope of income, exemptions, procedural rules, and compliance requirements, as well as alignment between the existing Income-tax Act, 1961, and the new Income-tax Act, 2025. In essence, these amendments constitute the final set of legislative changes shaping the tax framework and its implementation for the relevant financial year.

Table of Contents

1. Introduction
2. Proposed Amendments to the Companies Act 2013
3. Amendments Proposed Related to General Meetings
4. Amendments Proposed Related Books of Accounts and Auditors
5. Amendment Proposed Related to Corporate Social Responsibility (CSR)
6. Amendments Proposed for Cost Audit Compliance [Section 148]
7. Amendments Proposed for Directors and KMPs
8. Amendments Proposed for Meetings [Section 173(5)]
9. Revision of Penalties for Loans and Investments [(Section 186(13)]
10. Miscellaneous Proposals under the Amendment Bill 2026
11. Amendments Proposed Related to Strike-Off and Restoration Mechanism
12. Amendments Proposed Related to Winding-up Provisions
13. Amendments Proposed Related to Companies Capable of Being Registered
14. Amendments Proposed Related to Producer Companies
15. Appeal Mechanism
16. Amendments Proposed Related to Compounding of Certain Offences
17. Amendments Proposed Related to Adjudication and Settlement Mechanism
18. Amendments Proposed Related to Filing of Appeals
19. Amendments Proposed Related to Dormant Company
20. Proposed Amendments to the Limited Liability Partnership Act, 2008

1. Introduction

On March 23, 2026, the Corporate Laws (Amendment) Bill, 2026, was introduced in the Lok Sabha, proposing targeted changes to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. The Bill was referred to a Joint Parliamentary Committee (JPC) on the same day for detailed examination. The Bill aims to enhance the ease of doing business, simplify compliance requirements, and strengthen the overall regulatory framework governing companies.

The proposed amendments introduce wide-ranging changes across key governance and compliance areas, including flexibility in conducting board and general meetings through physical, virtual, and hybrid modes, and relaxation in notice requirements. They strengthen the regulatory framework relating to directors and KMPs by expanding disqualification criteria, introducing a “fit and proper person” requirement, mandating an active DIN throughout tenure, and prescribing penalties for breach of directors’ duties.

Further, the Bill provides for stricter compliance and penalty frameworks for listed companies, particularly in relation to the maintenance of books of accounts, cost audit, and overall financial reporting. It enhances the regime for auditors through fixed penalties and mandatory intimation to the NFRA. Also, it revisits provisions relating to CSR thresholds, cost audit accountability, board meetings for certain classes of companies, and adjudication and settlement mechanisms, thereby promoting greater transparency and accountability. The proposed amendments are as follows:

2. Proposed Amendments to the Companies Act 2013

2.1 Amendment to Definitions [Section 2]

The Bill proposes to amend Section 2 of the Companies Act, 2013, which defines various terms used in the Act. It seeks to modify clause (28), which defines ‘Cost Accountant’, by substituting the words ‘Cost and Works Accountants’ with the words ‘Cost Accountants’.

Further, it proposes to insert a new proviso to clause (41), which defines ‘financial year’. The proviso states that the Central Government may, on an application made by a company or body corporate, or on commercial considerations, allow the company or body corporate to realign its financial year as the period ending on the 31^st day of March of the following year.

The Bill also proposes to insert definitions of ‘Regional Director’ and ‘Registered Valuer’.

Additionally, the Bill proposes to expand the definition of ‘small company’ under section 2(85) of the Act, by increasing the existing upper limit of paid-up share capital from Rs 10 crore to Rs 20 crore, and the turnover threshold from Rs 100 crore to Rs 200 crore.

The proposed amendment aims to update and clarify key definitions under the Act, thereby improving interpretational clarity and consistency. It provides companies with the flexibility to align their financial year with their business needs. The expansion of thresholds for small companies will widen the scope of entities eligible for lesser compliance requirements, thereby promoting ease of doing business.

2.2 Provision for a Fixed Penalty for Incorrect Information in Name Reservation [Section 4]

Section 4 of the Companies Act, 2013 deals with the ‘Memorandum’.

Section 4(5)(ii)(a) provides that where, after reservation of a name, if it is found that the name was applied for by furnishing wrong or incorrect information, then, if the company has not been incorporated, the reserved name must be cancelled. The person making an application is liable to a penalty which may extend to Rs 1,00,000.

The Bill proposes to amend Section 4(5)(ii)(a) of the Act to provide for a fixed penalty amount of Rs 50,000.

2.3 Requirement for Certain Classes of Companies to Maintain Modes of Communication and Provide Particulars [Section 12A]

The Bill proposes to insert a new section 12A in the Companies Act, 2013, to provide that the class or classes of companies, as may be prescribed, must maintain a website, an email address and other modes of communication in such form and manner as may be prescribed.

Further, the details of the website, e-mail address, and other modes of communication, and any changes therein, must be intimated to the Registrar in such form and within such period as may be prescribed.

The amendment aims to mandate specified companies to maintain functional communication channels, ensuring better accessibility and transparency. It also introduces a compliance requirement to regularly update such details with the Registrar, increasing regulatory oversight.

2.4 Issuance and Maintenance of Share Capital in Foreign Currency for IFSC Companies [Section 43A]

The Bill proposes to insert a new section 43A in the Companies Act, 2013, to provide for requirements relating to the issuance and maintenance of share capital, preparation and maintenance of books of account, etc., filing, submitting or delivering documents by companies set up and incorporated in the IFSC jurisdiction in a permitted foreign currency.

Presently, the Companies Act, 2013, does not include specific provisions to enable companies to prepare accounts or financial statements in foreign currencies. Considering the nature of companies set up in the IFSC jurisdiction, these provisions are being introduced through the insertion of this new section.

The Bill also proposes to clarify that such companies must pay fees, fines and penalties under the Companies Act and the rules made thereunder in Indian rupees.

The amendment aims to enable IFSC companies to issue share capital, maintain books of account, and file in the permitted foreign currency, aligning their operations with global business practices. This reduces currency conversion complexities and improves operational efficiency for internationally oriented entities. At the same time, the requirement to pay fees, fines, and penalties in Indian rupees ensures continued regulatory consistency.

2.5 Rationalisation of Buy-back Framework and Flexibility for Prescribed Classes of Companies [Section 68]

It is proposed to amend section 68 to provide greater flexibility in the buy-back framework for such class or classes of companies as may be prescribed.

Under sub-section (2), clause (c) is proposed to be modified to allow buy-back up to such percentage of the aggregate of paid-up capital and free reserves as may be prescribed for specified classes of companies. It is also clarified that, for buy-back of equity shares in any financial year, this percentage will be calculated with reference to the total paid-up equity capital of that financial year.

Further, under clause (g), a proviso is proposed to permit such prescribed classes of companies to undertake up to two buy-back offers within one year of the closure of the previous offer, subject to a minimum gap of six months between the two buy-backs.

Additionally, in sub-section (5), clause (c) is proposed to be amended to include schemes linked to the value of the share capital of a company (as referred to in section 62(1)(b)), thereby bringing such instruments within the scope of the provision and aligning the buy-back restrictions with newer forms of capital-linked schemes.

3. Amendments Proposed Related to General Meetings

3.1 Allowing Companies to Hold AGMs and EGMs in Physical, Virtual, or Hybrid Mode [Sections 96 & 100]

The proposed amendments to Sections 96 and 100 introduce flexibility in the way companies conduct their Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs).

Under the existing law, AGMs must be held in person, while EGMs may be conducted via video conferencing only to a limited extent, subject to temporary relaxations and prescribed rules. The law does not expressly recognise fully virtual or hybrid meetings as a standard practice.

The proposed provision also mandates that every company shall hold its annual general meeting in physical mode at least once in every three years. The amendment gives companies greater flexibility in conducting annual general meetings and extraordinary general meetings and promotes wider shareholder participation through virtual and hybrid modes.  This recognises the growing importance of digital participation and makes it easier for shareholders to attend meetings regardless of location.

3.2 Permitting Shorter Notice Period of 7 Days for Wholly Virtual EGMs [Section 100]

Under the existing provision, a general meeting can be called only with at least 21 days’ notice, and any shorter notice is permitted only if the prescribed majority of members consents. This ensures that shareholders have sufficient time to consider the agenda and participate effectively in the meeting.

The proposed amendment seeks to insert a proviso specifically for Extraordinary General Meetings (EGMs) conducted wholly through video conferencing or other audio-visual means under Section 100(7). It allows such meetings to be convened with a minimum of 7 days’ notice, or such other period as may be prescribed, without strictly relying on the conventional consent requirement for shorter notice.

This marks a shift from a rigid notice framework to a more context-based approach. Since virtual meetings eliminate logistical barriers like travel and physical arrangements, a shorter notice period becomes practical and justified. This enables companies to respond quickly to urgent matters that require shareholder approval, thereby improving corporate agility.

4. Amendments Proposed Related Books of Accounts and Auditors

4.1 Introducing Higher Penalties for Non-compliance with Financial Record-keeping Requirements [Section 128]

The proposed amendment to Section 128 provides greater clarity and stricter penalties for non-compliance with provisions relating to books of account. Instead of a variable fine, a fixed penalty structure is introduced, with listed companies facing a penalty of Rs. 5 lakh and other companies facing a penalty of Rs. 50,000.

Further, for serious violations relating to the maintenance and preservation of financial records, significantly higher penalties are proposed. Listed companies may be liable for penalties up to Rs. 25 lakh, while other companies may face penalties up to Rs. 5 lakh. This change underscores the importance of financial transparency and strengthens enforcement by making penalties more certain and deterrent.

4.2 Penalties for Contravention of Provisions Related to Auditor [Section 147]

The proposed amendment to Section 147 of the Companies Act, 2013, aims to simplify and standardise penalties for auditor-related (Section 139 to 146) non-compliance.

Under the existing law, penalties are mostly expressed as a range of fines, which can create inconsistency in enforcement. The amendment introduces fixed penalties.

The company will be liable to pay Rs. 1 lakh, with an additional Rs. 500 for each day of continuing default, up to a maximum of Rs. 5 lakh, while the officer in default will pay Rs. 25,000, with Rs. 200 per day for continuing default, up to a maximum of Rs. 1 lakh.

4.3 Intimation to NFRA Regarding the Appointment of Auditors in Specified Companies [New Section 132A]

The proposed insertion of new Section 132A requires that certain auditors and audit firms must register their details with the National Financial Reporting Authority (NFRA) before being appointed under Section 139 for specified companies or bodies. Auditors must also file prescribed documents, returns, or information with the NFRA within the specified time and manner. In case of failure to comply with these provisions, a penalty of at least Rs. 25,000, with an additional Rs. 500 per day for continuing default, up to a maximum of Rs. 25 lakh.

5. Amendment Proposed Related to Corporate Social Responsibility (CSR)

5.1 Increasing the Net Profit Threshold from Rs. 5 Crore to Rs. 10 Crore for Applicability of CSR

The proposed amendment to Section 135 of the Companies Act, 2013, reflects a shift toward more proportionate regulation in the area of Corporate Social Responsibility (CSR).

Under the existing law, a company is required to constitute a CSR Committee and contribute to CSR if it meets any of the prescribed financial thresholds, including a net profit of Rs. 5 crore or more. This means that even relatively small companies that cross the Rs. 5 crore profit mark must comply with CSR governance requirements, including forming a committee and adhering to related procedural obligations.

The proposed amendment seeks to increase this net profit threshold from Rs. 5 crore to Rs. 10 crore, while keeping the other criteria, net worth and turnover, unchanged. As a result, companies with net profits between Rs. 5 crore and Rs. 10 crore will no longer be required to constitute a CSR Committee.

6. Amendments Proposed for Cost Audit Compliance [Section 148]

6.1 Legal Recognition of Cost Accounting Standards [Section 148(1A)]

The Cost Accounting Standards issued by the Institute of Cost Accountants of India are largely advisory and lack statutory backing. The Bill proposes to insert this new sub-section to empower the Central Government to prescribe cost accounting standards based on recommendations from the Institute of Cost Accountants of India. This aims to ensure consistency and reliability in cost audits and make them legally enforceable.

6.2 Increased Accountability of KMPs in Cost Audit [Section 148(8)]

Under the existing provisions, officers may be indirectly liable under general provisions. Still, there is no explicit assignment of responsibility to Key Managerial Personnel (KMPs), such as the Managing Director, the Whole-time Director in charge of finance, or the Chief Financial Officer. In practice, this sometimes leads to gaps in accountability because enforcement targets the company rather than specific decision-makers.

Under the proposed amendment, Key Managerial Personnel, such as the Managing Director, the Whole-time Director in charge of finance, the Chief Financial Officer, or any officer entrusted with such responsibility by the Board, would be directly responsible for compliance with the cost audit provisions. It prevents situations where responsibility is unclear and encourages KMPs to monitor cost audit requirements actively.

Proposed penalties for non-compliance include Rs. 5 lakh for listed companies and Rs. 50,000 for other companies. This reflects an intention to make individuals accountable rather than treating compliance as a collective corporate obligation.

6.3 Penalties for Cost Audit Non-Compliance [Section 148(9)]

The bill proposes inserting a new subsection to specify penalties for defaults under other provisions. In case of default in the appointment of a Cost Accountant by the Board and in the determination of remuneration by the members, the company shall be liable to a penalty of Rs. 10,000, and, in case the default continues, an additional penalty of Rs. 100 is imposed for each day during which the default persists, subject to a maximum of Rs. 2 lakh. Similarly, every officer of the company who is in default is also liable to a penalty of Rs. 10,000, with a further Rs. 100 per day after the first day of continuing default, subject to a maximum of Rs. 50,000. The intent behind these provisions is to ensure timely and effective compliance, holding both the company and its responsible officers accountable for any lapses.

6.4 Residual Penalties [Section 148(10)]

Any other defaults not addressed under subsections (8) and (9) will be covered under Section 147. The residual provision ensures that no compliance gap exists for cost audit obligations, thereby strengthening overall regulatory coverage.

7. Amendments Proposed for Directors and KMPs

7.1 Expanded Disqualification for Independent Directors

7.1.1 Disqualification Shall Include Who Are in Employment During the Current Year, in Addition to the Preceding 3 F.Y. [Section 149(6)(e)(i)]

Under the existing law, an individual is disqualified from being appointed as an independent director if they or any of their relatives have, in the 3 financial years immediately preceding the year of appointment, held the position of a Key Managerial Personnel (KMP) or have been an employee of the company, its holding company, subsidiary, or associate company.

The Bill proposes extending the disqualification of independent directors to include prohibited employment or professional associations during the current financial year, in addition to the preceding 3 years. This aims to ensure that directors maintain genuine independence at all times.

7.1.2 Stricter Threshold for Professional Relationships [Section 149(6)(e)(ii)(B)]

Under the existing law, an individual is disqualified from being appointed as an independent director if, in any of the three financial years immediately preceding the year of appointment, they have been an employee, proprietor, or partner of either of the any legal or consulting firm that has conducted transactions with the company, its holding, subsidiary, or associate company amounting to 10% or more of the firm’s gross turnover.

The bill proposes to reduce the threshold for disqualification based on transactions with professional firms, such as legal or consulting entities. This is intended to strengthen the impartiality of independent directors by minimising conflicts of interest.

7.2 Requirement of Active DIN for Directors (Section 152(3))

An active DIN throughout a director’s tenure ensures continuity, traceability, and accountability. Previously, DIN issues, such as deactivation or duplication, could undermine regulatory oversight. The Bill proposes that a Director Identification Number (DIN) must remain valid and active not only for appointment but throughout the tenure. A deactivated DIN would result in disqualification. This measure seeks to ensure continuous traceability and compliance for directors.

7.3 Tenure for Additional Directors (Section 161(1))

The Bill proposes limiting the tenure of additional directors to the earlier of the next general meeting or three months from the date of appointment. This is intended to prevent indefinite temporary appointments without shareholder approval, reinforcing transparency and accountability.

7.4 Expansion of Director Disqualification Grounds (Section 164)

7.4.1 Conflict of Interest Restrictions (Section 164(1)(j))

The bill proposes inserting a new clause (j) into section 164(1) to disqualify directors who have recently acted as auditors or valuers, addressing the risk of conflicts of interest and ensuring that those with prior professional relationships do not influence company decisions. This aligns with global best practices in corporate governance.

7.4.2 Fit and Proper Person Requirement (Section 164(1)(k))

The bill proposes inserting a new clause (k) into section 164(1) to include the “fit and proper person” requirement for appointment as a director. This aims to ensure that directors meet ethical, professional, and integrity standards, promoting a culture of responsible leadership. It provides a qualitative measure beyond technical eligibility.

7.5 Penalties for Breach of Directors’ Duties (Section 166(8))

The Bill proposes introducing a new subsection to prescribe penalties for directors who breach their duties under the Companies Act. Under this provision, if a director fails to comply with the requirements of this section, except for those specified under sub-section (5), they shall be liable to a penalty of Rs. 5 lakh in the case of a listed company and Rs. 2 lakh in the case of any other company.

The purpose of this amendment is to make fiduciary duties enforceable rather than merely advisory, ensuring that directors act responsibly and diligently. By attaching tangible financial consequences to violations, the provision aims to reduce negligence and misconduct, strengthening overall corporate governance.

7.6 Simplification of Resignation Process for Non-Director KMP [(Section 203A)]

The Bill proposes that whole-time KMPs who are not directors may resign by giving written notice to the company. If the company fails to acknowledge, the KMP may directly submit the notice to the Registrar. This proposal is intended to protect KMPs from liability arising from the company’s inaction.

8. Amendments Proposed for Meetings [Section 173(5)]

The Bill proposes reducing the minimum number of board meetings for small companies, one-person companies, and dormant companies from two per year to one per calendar year. This aims to reduce compliance burdens while maintaining minimum oversight for smaller entities.

9. Revision of Penalties for Loans and Investments [(Section 186(13)]

It is proposed that companies violating sub-sections (9) or (10) of Section 186 would pay fines of Rs. 1 lakh, with an additional Rs. 500 per day for continuing violations, up to Rs. 5 lakh. Officers responsible would pay Rs. 25,000, with Rs. 200 per day for continuing defaults, capped at Rs. 1 lakh. The intention is to ensure proportionate and enforceable compliance.

10. Miscellaneous Proposals under the Amendment Bill 2026

10.1 Disposal of Pre-2013 Shareholding Arrangements (Section 233A)

The Bill proposes a new provision requiring companies to dispose of or cancel the shares held by companies in their own name or through a trust under arrangements made before 2013. Under the proposed rules, companies are required to dispose of these shares within 3 years. Failure to comply with these requirements will result in cancellation of the shares and a penalty of Rs. 10,000 for each day until the issue is resolved.

10.2 Removal of Certain Tribunal Powers (Omission of Section 242)

By omitting Section 242 regarding the Tribunal’s powers, the Bill aims to streamline administrative decision-making and reduce reliance on judicial intervention. The logical intention is faster resolution of corporate matters and reduced procedural delays.

11. Amendments Proposed Related to Strike-Off and Restoration Mechanism

11.1 Clarification of Grounds and Procedure for Striking Off of Company Name [Section 248]

The existing provision under section 248 provides for the removal of a company’s name in specified circumstances, including failure to file financial statements or annual returns for a continuous period.

The Bill proposes to insert an illustration to clarify the circumstances in which a company shall be considered for striking off, particularly in cases of non-filing of financial statements or annual returns. It further provides that the requirement relating to the extinguishment of liabilities shall be complied with in the manner prescribed. Additionally, it enables any person to make representations to the Registrar regarding the proposed striking off. The terminology is also aligned by substituting ‘removal of name’ with ‘striking off the name’.

The amendment provides greater clarity on the grounds for striking off, introduces procedural flexibility through rule-based mechanisms, and allows stakeholder participation.

11.2 Introduction of Regional Director in Restoration Mechanism [Section 252]

Under the existing framework, applications to restore a company’s name are made to the Tribunal. The Bill proposes to include the Regional Director in the restoration mechanism, enabling the Regional Director to deal with such applications in accordance with the prescribed manner. This is expected to reduce the burden on the Tribunal and streamline the restoration process through administrative handling.

12. Amendments Proposed Related to Winding-up Provisions

12.1 Rationalisation of Winding-up Provisions and Introduction of Appeal Mechanism [Sections 361 & 365A]

The existing provisions govern the appointment and functioning of Company Liquidators within a relatively limited framework. The Bill proposes to expand the pool of eligible Company Liquidators by enabling the appointment of such a class of persons as may be prescribed, including insolvency professionals. It further provides for appointment, functioning and related aspects in such manner as may be prescribed, including the role of the Central Government.

Additionally, a new section 365A is inserted to provide an appeal mechanism against orders of the Central Government. Such a person may prefer an appeal within a period of 45 days from the date of receipt of such order by him, before the Appellate Tribunal in such manner and on payment of such fee, as may be prescribed.

13. Amendments Proposed Related to Companies Capable of Being Registered

13.1 Expansion of Scope of Entities Eligible for Registration [Section 366]

The proposed amendment to section 366(1) expands the scope of entities that may be registered under Part I of Chapter XXI. It inserts the words ‘any non-trading company’ after the words ‘co-operative society, society’, thereby expressly including non-trading companies within the ambit of entities eligible for registration. This clarifies and broadens the existing definition of ‘company’ for registration under this Part.

14. Amendments Proposed Related to Producer Companies

14.1 Streamlining of Governance Framework for Producer Companies [Sections 378ZA & 378ZF]

The provisions relating to annual general meetings are proposed to be clarified by prescribing timelines for holding the first AGM within 9 months of incorporation and subsequent AGMs within 6 months of the end of the financial year. It is also clarified that holding the first AGM dispenses with the requirement of holding an AGM in the year of incorporation.

Further, it is proposed to amend section 378G(3) to provide that the members shall adopt the articles of the Producer Company and appoint directors of its Board at the first annual general meeting, in place of the existing requirement to do so at the annual general meeting.

It is proposed to amend sub-section (9) to substitute the words “members of the Producer Company shall” with the words “members or one hundred members of the Producer Company, whichever is less, shall”. Consequently, the quorum for the annual general meeting shall be one-fourth of the total number of members or one hundred members, whichever is less, unless the articles provide for a larger number.

Additionally, it has been proposed to mandate that every Producer Company having an average annual turnover exceeding five crore rupees, or such other amount as may be prescribed, in each of the three consecutive financial years, shall appoint an internal auditor. Such an internal auditor shall be a chartered accountant, cost accountant, or such other professional as may be decided by the Board, to conduct an internal audit of the functions and activities of the Producer Company.

15. Appeal Mechanism

15.1 Insertion of Appeal Mechanism Against Decisions of Registrar [Section 396A]

It is proposed to insert a new section 396A to provide that any person aggrieved by a decision of the Registrar under section 4 or section 7 may prefer an appeal to an officer not below the rank of Joint Director, as may be authorised by the Central Government. The appeal shall be made in such form and manner, and within such period, as may be prescribed.

15.2 Insertion of Provision Relating to Decision in Case of Difference of Opinion in Appellate Tribunal [Section 418A(3)]

It is proposed to amend section 418A by inserting a new sub-section (3) to provide that where the Members of a Bench of the Appellate Tribunal differ in opinion on any point or points, the matter shall be decided in accordance with the opinion of the majority, if any. In cases where the Members are equally divided, they shall state the points of difference, and the Chairperson shall refer the case for hearing on such points by one or more of the other Members of the Appellate Tribunal. The decision shall thereafter be in accordance with the opinion of the majority of Members who have heard the case, including those who first heard it.

16. Amendments Proposed Related to Compounding of Certain Offences

16.1 Enhancement of Monetary Threshold for Compounding of Offences [Section 441(1)(b)]

Section 441 of the Act deals with ‘Compounding of certain offences’.

The Bill proposes to amend Section 441(1)(b) of the Act to replace the words ‘does not exceed twenty-five lakh rupees’ with the words ‘does not exceed one crore rupees’, thereby enhancing the jurisdictional threshold for applications for compounding by the Regional Director or any officer authorised by the Central Government.

16.2 Rationalisation of Lesser Penalty Framework for Specified Companies [Section 446B]

The Bill proposes to amend Section 446B of the Act relating to ‘Lesser Penalties for certain companies’. The amendment seeks to replace the words ‘liable to a penalty which shall not be more than one-half of the penalty’ with the words ‘liable to a penalty of one-half or such per cent not exceeding one-half of the penalty, as may be prescribed.

17. Amendments Proposed Related to Adjudication and Settlement Mechanism

17.1 Strengthening of Adjudication Mechanism for Penalties [Section 454]

Currently, penalties are adjudicated by the Registrar.

The Bill proposes to substitute the authority by replacing ‘Registrar’ with ‘Adjudicating Officer’, being an officer not below the rank of Assistant Registrar. It also enables companies or officers in default to make applications for adjudication. Further, an Appellate Authority, not below the rank of a Joint Director, is introduced to hear appeals. The amendment formalises the adjudication framework and introduces a clearer hierarchy for appeals, improving efficiency and consistency in penalty enforcement.

17.2 Insertion of Recovery Mechanism for Penalties [Section 454B]

It is proposed to insert a new section 454B to provide a structured mechanism for recovery of penalties under the Act. Where a person fails to pay the penalty imposed, the Recovery Officer may issue a certificate specifying the amount due and proceed to recover the same through specified modes, including attachment and sale of movable or immovable property, attachment of bank accounts, arrest and detention, or appointment of a receiver. The provision further applies, mutatis mutandis, the recovery framework under the Income-tax Act, 1961, thereby aligning the recovery process with an established statutory mechanism.

17.3 Insertion of Settlement Mechanism for Contraventions [Section 454C]

It is proposed to insert a new section 454C to introduce a formal settlement mechanism for contraventions liable to penalty under the Act. The Central Government may constitute a Specified Authority to consider settlement applications. An application may be made at any time before the penalty order is passed. The Specified Authority may, having regard to the nature, gravity and impact of the contravention, agree to settlement on payment of such sum or on such terms as may be prescribed. If the settlement is not accepted or no agreement is reached, the application shall be rejected, and proceedings shall continue. The provision also stipulates that no appeal shall lie against the order of the Specified Authority and that settlement amounts shall be credited to the Consolidated Fund of India.

18. Amendments Proposed Related to Filing of Appeals

18.1 Pre-deposit Requirement for Filing Appeals [Section 454D]

It is proposed to insert a new section 454D to provide that no appeal shall be entertained by the Appellate Tribunal, Regional Director or the Appellate Authority, as the case may be, unless the appellant has deposited ten per cent. of the amount payable under the order. This requirement applies to orders passed by the National Financial Reporting Authority under section 132, the Valuation Authority under section 247, and the adjudicating officer under section 454, thereby introducing a pre-deposit condition for admission of appeals.

19. Amendments Proposed Related to Dormant Company

19.1 Tightening of Provisions Relating to Dormant Company [Section 455]

Under the existing provision, eligible companies may apply for dormant status, and the definition of an inactive company is relatively narrow.

The Bill proposes to substitute ‘may apply’ with ‘shall apply’, making it mandatory for eligible companies to seek dormant status. It also widens the scope of ‘inactive company’ by including the absence of business or non-business transactions.

The amendment strengthens compliance by making dormancy mandatory in applicable cases and broadening the definition of inactivity.

20. Proposed Amendments to the Limited Liability Partnership Act, 2008

20.1 Insertion of New Definitions [Section 2]

The Bill seeks to amend Section 2 of the LLP Act, 2008, by inserting new definitions for the terms “International Financial Services Centre”, “International Financial Services Centres Authority”, “permitted foreign currency” and “Specified International Financial Services Centre LLP”.

20.2 Declaration Requirement by Professionals [Section 11]

The Bill seeks to amend section 11(1) of the Act, 2008, to provide that the requirement of a declaration by an advocate, chartered accountant, cost accountant, or CS in practice at the time of formation or incorporation of an LLP must apply only where such professionals are engaged for its formation or incorporation.

Further, the Bill seeks to insert a new proviso in clause (c) of Section 11(2) to enable a Specified International Financial Services Centre LLP to state its objects for undertaking financial services activities as permitted under the IFSCA Act, 2019.

The amendment aims to rationalise the requirement for professional declarations by applying it only where professionals are engaged, thereby reducing unnecessary compliance burden. It also provides IFSC LLPs with the flexibility to define their objects in line with permitted financial services activities, enhancing ease of doing business.

20.3 Registered Office Requirements for Specified IFSC LLPs [Section 13]

Section 13 of the LLP Act, 2008, deals with the registered office of a limited liability partnership and changes therein. The Bill seeks to insert a new proviso into Section 13(1), stating that a specified IFSC LLP must maintain its registered office at an IFSC at all times.

Further, the Bill proposes to insert a new proviso into Section 15(1) of the Act, requiring the specified IFSC LLP to include the suffix “IFSC LLP” in its name.

20.4 Filing Requirements for Changes in LLP Agreement for SEBI/IFSCA-Regulated LLPs [Section 23]

Section 23 of the LLP Act deals with the relationship of partners. The Bill proposes to insert a new proviso that, in the case of a prescribed class or classes of LLPs regulated by the SEBI or the IFSCA, as the case may be, the requirement to file any changes to the LLP agreement must be as prescribed by the rules.

20.5 Form of Contribution for Specified IFSC LLPs [Section 32]

Section 32 of the LLP Act, 2008, deals with the form of contribution. Section 32(2) specifies that the monetary value of the contribution of each partner must be accounted for and disclosed in the accounts of the LLP in the manner as may be prescribed.

The Bill proposes to insert new provisos into Section 32(2) of the Act, providing that the monetary value of each partner’s contribution to a Specified IFSC LLP must be accounted for and disclosed in a permitted foreign currency in the accounts of the Specified IFSC LLP.

Further, it provides the period and manner in which an LLP set up in IFSC before the commencement of the Corporate Laws (Amendment) Act, 2026, may convert monetary value of contribution of each of its partners from Indian rupee to a permitted foreign currency within such period and in such manner as may be specified by the IFSCA, in consultation with the Central Government.

Also, it states that a Specified IFSC LLP must not be permitted to receive or accept monetary contributions from any partner without converting them into a permitted foreign currency.

The amendment aims to enable Specified IFSC LLPs to maintain and report partner contributions in the permitted foreign currency, in line with international financial practices.

20.6 Application of Companies Act Provisions for Valuation under LLP Act [Section 33A]

The Bill proposes to insert a new section 33A in the LLP Act, 2008, to provide that the provisions of section 247 of the Companies Act, 2013, relating to “valuation by registered valuers’, must mutatis mutandis apply for the valuation required in respect of a partner’s contribution in an LLP or of any property or assets or net worth of such limited liability partnership or its liabilities under the provisions of LLP Act or rules made thereunder.

The amendment aims to mandate valuation by registered valuers for LLPs, thereby enhancing credibility and consistency in the valuation of contributions and assets. It aligns LLP valuation practices with the Companies Act framework, thereby strengthening transparency and regulatory oversight.

20.7 Rationalisation of Penalty for Non-compliance with Registrar’s Requisition [Section 38]

Section 38 of the LLP Act, 2008, provides the Registrar with the power to obtain information. The Bill proposes to insert a new sub-section (4) into section 38 of the Act, providing that any person who, without lawful excuse, fails to comply with any requisition of the Registrar (other than a summons) issued under this section must be liable to a penalty of Rs 10,000.

The amendment aims to introduce a fixed penalty for non-compliance with the Registrar’s requisition, bringing clarity and certainty in enforcement.

20.8 Conversion of a Specified Trust into an LLP [Section 57A]

The Bill proposes to insert a new section 57A in the LLP Act, 2008, to allow the conversion of a specified trust into a limited liability partnership in accordance with the provisions of Chapter X and the Fifth Schedule.

The Bill also proposes to insert an explanation to the new section to clarify that, for this section, the term ‘specified trust’ means a trust established under the Indian Trusts Act, 1882, or under a Central Act or State Act and registered by the SEBI or by the IFSCA, having such activities as may be prescribed.

Further, the Bill proposes to insert a new Schedule (Fifth Schedule) to the LLP Act, 2008, to specify the conditions that must be fulfilled before conversion of a specified trust into an LLP. The provisions of the Fifth Schedule are similar to the conditions provided under the Second, Third and Fourth Schedules to the Act.

The amendment aims to provide a structured framework for converting a specified trust into an LLP, subject to prescribed conditions. It enhances regulatory clarity and facilitates transition to a more flexible business structure while ensuring compliance safeguards.

20.9 Enabling Conversion of Specified Trusts into LLPs [Section 58]

The Bill proposes to replace Section 58 of the LLP Act, 2008, which deals with ‘Registration and effect of conversion of a firm, private company and an unlisted public company into LLP’.

The Bill proposes to include enabling provisions for the registration and legal effect of the conversion of a specified trust into a limited liability partnership. This is in addition to a firm, private company and an unlisted public company.

The amendment aims to expand the scope of eligible entities for conversion into LLPs by including specified trusts. This is expected to provide greater structural flexibility and facilitate ease of doing business by enabling trusts to adopt a more efficient LLP form where appropriate.

20.10 Use of Permitted Foreign Currency for Filing of Document by Specified IFSC LLPs [Section 68]

Section 68 of the LLP Act, 2008, deals with ‘Electronic filing of documents’. Section 68(1) states that any document required to be filed, recorded or registered under this Act may be filed, recorded or registered in such manner and subject to such conditions as may be prescribed.

The Bill proposes to insert two new provisos to Section 68(1), which provides that the Central Government may require a Specified IFSC LLP to use permitted foreign currency for filing, recording or registering any document in such manner as may be prescribed.

Further, such IFSC LLP must pay fees, fines, and penalties as provided under the LLP Act or any rules made thereunder, in Indian rupees.

The amendment aims to enable operational flexibility for Specified IFSC LLPs by permitting filings in foreign currency, aligning with global business practices. It also ensures regulatory consistency by mandating payment of fees, fines and penalties in Indian rupees.

20.11 Appeal to the Officer of the Central Government [Section 68B]

The Bill proposes to insert a new section 68B in the LLP Act, 2008, to provide that any person aggrieved by the decision of the Registrar under section 12 relating to ‘Incorporation by registration’ or section 16 relating to ‘Reservation of name’ may prefer an appeal to the officer of the Central Government, in such a form and manner and within such period as may be prescribed.

The proposed amendment aims to introduce a formal appellate mechanism against the Registrar’s decisions, thereby enhancing procedural fairness and transparency.

20.12 Application for Adjudication of Penalty by LLP or its Partners [Section 76A]

The Bill proposes to insert a new sub-section (1A) to section 76A of the LLP Act, 2008, relating to ‘Adjudication of penalties’. It states that an LLP or its partner or designated partner may make an application for adjudication of penalty in such a form and manner and on payment of such fees, as may be prescribed.

Further, the bill proposes to insert a new sub-section (10) to provide that, on and from the commencement of the Corporate Laws (Amendment) Act, 2026, where a provision in respect of offence provided in LLP Act has been amended to provide for adjudication under the section, the manner of withdrawal of the complaint and the manner of transfer of such matter for adjudication, whether pending in the Court or otherwise, must be dealt with in accordance with such scheme as may be notified by the Central Government.

The amendment aims to provide a structured mechanism for LLPs and their partners to apply for adjudication of penalties, thereby enhancing procedural clarity and ease of compliance. It also facilitates the transition of pending cases, thereby ensuring streamlined enforcement and reduced litigation.