What Happened
- The Corporate Laws (Amendment) Bill, 2026, introduced by Finance Minister Nirmala Sitharaman, proposes 107 amendments to the Companies Act, 2013 and the Limited Liability Partnership (LLP) Act, 2008.
- Key changes include: doubling the threshold for 'small company' classification, decriminalising a range of procedural defaults (replacing criminal penalties with fixed monetary penalties), expanding the powers of the National Financial Reporting Authority (NFRA), and introducing a structured framework for LLPs operating in International Financial Services Centres (IFSCs).
- The Bill allows LLPs in IFSCs to maintain accounts and contributions in foreign currencies and introduces provisions for trust-to-LLP conversion.
- Opposition raised concerns about the Bill allegedly diluting mandatory Corporate Social Responsibility (CSR) obligations, excessive delegation of legislative power to subordinate legislation (Henry VIII clause objections), and insufficient parliamentary oversight of key thresholds.
- After introduction, the Lok Sabha referred the Bill to a Joint Parliamentary Committee (JPC) for further scrutiny.
Static Topic Bridges
Companies Act, 2013: Regulatory Architecture
The Companies Act, 2013 replaced the Companies Act, 1956 and introduced sweeping governance reforms: mandatory CSR for profitable companies, class action suits, constituting NFRA, mandatory rotation of auditors, and the National Company Law Tribunal (NCLT). The Act classifies companies by size (small, medium, large), type (public/private), and purpose (one-person companies, producer companies, Section 8 companies), with compliance requirements scaled accordingly. Small companies — defined by paid-up capital and turnover thresholds — enjoy reduced compliance burdens.
- Section 135 of the Companies Act, 2013: mandates companies with net worth ≥₹500 crore, turnover ≥₹1,000 crore, or net profit ≥₹5 crore to spend 2% of average net profits on CSR
- Section 132: Constitution of National Financial Reporting Authority (NFRA)
- NCLT replaced the Company Law Board (CLB) and Board for Industrial & Financial Reconstruction (BIFR)
- Auditor rotation mandate: maximum 10-year continuous tenure for a firm auditing a company
- One Person Companies (OPCs): introduced for the first time under the 2013 Act
Connection to this news: The 2026 amendment modifies compliance thresholds and penalty structures within the 2013 Act's framework — particularly seeking to reduce the compliance burden on smaller companies while simultaneously strengthening auditor independence and NFRA oversight.
National Financial Reporting Authority (NFRA): India's Audit Regulator
NFRA was constituted on October 1, 2018 under Section 132 of the Companies Act, 2013. Its mandate is to recommend accounting and auditing standards, monitor compliance, and oversee the quality of audit services. NFRA has jurisdiction over listed companies and large unlisted public companies (net worth ≥₹500 crore or turnover ≥₹1,000 crore). Previously, auditor discipline was largely with the Institute of Chartered Accountants of India (ICAI) — NFRA created an independent government-run oversight body, reducing self-regulatory conflicts of interest.
- NFRA constituted: October 1, 2018; statutory basis: Section 132, Companies Act 2013
- Jurisdiction: Listed companies, large unlisted public companies, foreign companies
- Powers: Investigation of professional misconduct, audit quality reviews, policy recommendations
- Can impose penalties on auditors/audit firms and debar individuals for up to 10 years
- The 2026 amendment proposes granting NFRA corporate status and expanded enforcement powers
Connection to this news: The bill's proposal to grant NFRA corporate status and extend its powers to regulate non-audit services and auditor conduct post-tenure strengthens what was already a significant departure from pure self-regulation of the audit profession in India.
LLPs and IFSC: Ease of Doing Business Reforms
The Limited Liability Partnership Act, 2008 introduced the LLP structure — a hybrid combining the limited liability of a company with the flexibility of a partnership. LLPs have become popular for professional services firms, startups, and small enterprises. The International Financial Services Centres Authority (IFSCA) regulates IFSCs — special economic zones for financial services, with GIFT City (Gujarat) being India's primary IFSC. Foreign currency operations and international financial services concentrate in IFSCs, requiring a separate regulatory framework distinct from domestic law.
- LLP Act, 2008: LLPs have separate legal entity status; partners have limited liability
- IFSCA established under the International Financial Services Centres Authority Act, 2019
- GIFT City (Gujarat International Finance Tec-City): India's first operational IFSC
- IFSCs operate under international financial regulations to attract global capital
- Trust-to-LLP conversion: proposed to facilitate restructuring of private trusts managing assets
Connection to this news: Allowing IFSC-based LLPs to operate in foreign currencies and formalising their regulatory framework directly addresses a structural gap that limited India's competitiveness as a global financial hub.
Key Facts & Data
- Bill proposes 107 amendments to Companies Act 2013 and LLP Act 2008
- CSR obligation threshold: 2% of average net profits (Section 135, Companies Act 2013)
- NFRA constituted: October 1, 2018 under Section 132, Companies Act 2013
- LLP Act: 2008; IFSCA Act: 2019
- Parliamentary referral: JPC constituted for further scrutiny after Lok Sabha introduction
- Key objection: alleged dilution of CSR requirements and excessive delegated legislation
- Finance Minister Nirmala Sitharaman tabled the Bill alongside the Finance Bill