New Delhi: Dozens of defaults that currently expose companies and their officials to criminal prosecution would be converted into fixed civil penalties—in some cases, lower than existing fines—if the government’s proposed changes to corporate laws are implemented.
The Corporate Laws (Amendment) Bill, 2026, was introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha Monday and referred to a joint parliamentary committee (JPC). The Bill seeks to amend the Companies Act, 2013, and the Limited Liability Partnership (LLP) Act, 2008, with its objective described as facilitating “greater ease of doing business for corporates”.
The proposed changes, among others, withdraw criminal liabilities and hand adjudication to departmental officers, who will be responsible for levying fixed penalties for some of the lapses.
The Opposition Congress has argued that the Bill suffers from excessive delegation of legislative functions in violation of Articles 245 and 246 of the Constitution.
Manish Tewari, Congress MP from Chandigarh, told Parliament after the proposed legislation was introduced, “The Bill in its present form, undermines the constitutional balance between the legislature and the executive, dilutes parliamentary oversight and raises serious concerns regarding arbitrariness, accountability and the rule of law.”
For experts, the Bill appears to be designed in line with Centre’s ‘ease of doing business’, but it penalises minor procedural lapses more severely than serious fiduciary breaches.
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What changes, and how much
Among the more significant changes to the Companies Act is related to defaults in holding an annual general meeting (AGM).
The default is currently punishable by a fine of up to Rs 1 lakh plus a continuing fine of Rs 5,000 per day. Under a revised legislation, the inability to hold an AGM would attract the same penalties, but these would be capped at Rs 2 lakh for the company and Rs 50,000 for officers. The cap, absent under the current law, limits what was previously open-ended liability.
Issuing a prospectus in contravention of the Act, which presently draws fines of Rs 50,000 to Rs 3 lakh, would attract a flat civil penalty of Rs 2 lakh, the Bill proposes.
Defaults relating to dealings in securities on stock exchanges, where fines currently run up to Rs 50 lakh across several sub-sections, have been decriminalised and replaced with fixed penalties.
Buy-back violations, currently drawing fines of Rs 1 to Rs 3 lakh on both company and officers, would attract stiffer penalties for listed entities–RS 25 lakh for the company and Rs 5 lakh for officers in default. Unlisted companies and their officers would each face Rs 2 lakh.
Failures in maintaining account books—fines of Rs 50,000 to Rs 5 lakh under the current law—would be replaced with a Rs 5 lakh civil penalty for listed companies and RS 50,000 for others.
Violations of audit provisions under Sections 139 to 146 of the Companies Act, where fines currently begin at Rs 25,000, would attract Rs 1 lakh for the company with a daily charge capped at Rs 5 lakh. The penalty would be Rs 25,000 for officers, with a daily charge capped at Rs 1 lakh.
The government would be empowered to set penalties at half the standard rate or lower for one-person companies, small companies, start-ups and producer companies.
For producer companies specifically, the improper use of the words ‘Producer Company Limited’—currently a fine of up to Rs 10,000 per day—would become a fixed penalty of Rs 1 lakh with a daily charge capped at Rs 5 lakh.
Under the LLP Act, failing to comply with a Registrar’s requisition (other than a summons)—currently a fine of Rs 2,000 to Rs 25,000—would be replaced with a fixed penalty of Rs 10,000.
Provisions governing maintenance of books of account and financial statements for LLPs would also be decriminalised, with existing fines of up to Rs 5 lakh replaced by a streamlined penalty structure. Repeated defaults within a three-year period would attract double the standard penalty amount.
To ease the burden on the National Company Law Tribunal, the Bill raises the monetary ceiling for offences that can be compounded by Regional Directors from Rs 25 lakh to Rs 1 crore.
The disproportion
Company secretaries and consultants Vinod Kothari, Pammy Jaiswal and Nitu Poddar of Vinod Kothari & Co. told ThePrint that while the decriminalised provisions were “largely compliance-oriented in nature”, the Bill had also decriminalised lapses with more serious governance implications.
“It is noteworthy that several provisions, the breach of which reflects deeper governance concerns, have also been decriminalised. Given that directors act as fiduciaries of shareholders and their duties form the bedrock of corporate governance, such decriminalisation raises broader concerns from a governance standpoint,” said Kothari.
For instance, Poddar said, a breach of the Directors’ Responsibility Statement—a mandatory document in which directors confirmed they have maintained accounting standards and proper records–would attract a penalty of Rs 3 lakh under the Bill.
Yet failure to spend on Corporate Social Responsibility (CSR), which may be “just a timing or completion issue”, can draw penalties up to Rs 1 crore, the Kothari & Co. team said.
Similarly, a lapse in private placements of stocks or capital—such as failing to hold subscription money in a separate account before allotment, described by the experts as a possible technical miss—can attract a penalty up to Rs 2 crore.
The most striking gap, in their assessment, was the absence of any specific penalty for asset stripping.
“Another glaring example of a lax provision is asset stripping by shifting undertakings without shareholders’ approval. There is no specific penalty for this, which means the general penal provision applies, levying a penalty Rs 10,000,” said Jaiswal.
(Edited by Prerna Madan)
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