Parliament Proposes Game-Changing Corporate Law Overhaul to Streamline Buybacks, Mergers, and Compliance

Parliament Proposes Game-Changing Corporate Law Overhaul to Streamline Buybacks, Mergers, and Compliance​

The Indian government has introduced a comprehensive 98-page Corporate Laws (Amendment) Bill, 2026, aimed at fundamentally reshaping the corporate landscape. The bill seeks to amend the Companies Act, 2013, and the Limited Liability Partnership Act, 2008, to simplify business processes.

Currently under review by a Joint Parliamentary Committee, the proposal aims to reduce unnecessary compliance burdens for businesses. However, it is important to note that these changes remain proposals and will only become law after clearing Parliament and receiving presidential assent.

The proposed amendments include significant shifts in how companies handle share buybacks, annual general meetings (AGMs), and merger thresholds. The government intends to identify specific categories of companies eligible for these relaxations later. Listed companies will continue to be subject to separate SEBI requirements regardless of these changes.

Enhanced Flexibility for Buybacks and Virtual AGMs​

Under current regulations, a company is prohibited from making another buyback offer within one year after its previous offer closes. The proposed Bill would allow prescribed companies to make two offers within a single year, provided there is a gap of at least six months between them.

The government may also set specific buyback limits for eligible entities, while the general ceiling remains at 25 percent of paid-up capital and free reserves. This proposal aligns with upcoming SEBI plans to restore open-market buybacks through stock exchanges starting August 1.

The Bill also introduces a modernized approach to Annual General Meetings (AGMs). Companies would gain the option to hold meetings physically, via video conferencing, or in a hybrid format. However, physical AGMs must still occur at least once every three years.

If a required number of shareholders request a hybrid meeting, the company is mandated to provide it. Furthermore, Extraordinary General Meetings (EGMs) may also be conducted online, with specific rules governing voting, identity checks, and questions.

Streamlined Merger Thresholds and CSR Adjustments​

One of the most significant structural changes involves the fast-track merger route for small companies and holding-subsidiary combinations. Currently, these require approval from shareholders and creditors holding at least 90 percent of the value.

The proposed Bill lowers this shareholder test to a majority of those present and voting who hold at least 75 percent of the value represented at the meeting. The creditor threshold would also be reduced to 75 percent for certain prescribed categories.

In terms of Corporate Social Responsibility (CSR), the Bill proposes raising the net profit trigger from Rs 5 crore to Rs 10 crore. It also doubles the spending threshold below which a company is not required to maintain a CSR committee, moving it from Rs 50 lakh to Rs 1 crore.

For companies with ongoing projects, the window to move unspent money into designated accounts would increase from 30 days to 90 days. The government retains the power to exempt specific categories of companies from these CSR requirements entirely.

Audit Exemptions and Strengthened NFRA Oversight​

The proposed legislation allows for the exemption of certain classes of companies from appointing auditors, provided they meet specified conditions. While eligible companies have not yet been identified, the Bill introduces stricter rules for those that do remain under audit.

For prescribed companies, auditors would be barred from providing non-audit services to the company, its holding company, or subsidiaries. This restriction would persist for three years following the end of the audit term.

To ensure transparency, boards would be required to respond to specific adverse audit observations and provide explanations for rejecting any audit committee recommendations. Additionally, the National Financial Reporting Authority (NFRA) would see expanded powers.

The NFRA would gain the authority to frame rules for investigations and issue advisories, warnings, or censures. The Bill also proposes a wider misconduct framework for auditors and stricter consequences for those who disobey regulator directions.

Expanded Employee Rewards and Higher Small Company Ceilings​

The Companies Act currently recognizes employee stock options (ESOPs). The proposed amendment widens this scope to include other employee-reward schemes linked to share value, such as Restricted Stock Units (RSUs) and Stock Appreciation Rights.

These schemes would require shareholder approval and remain subject to existing tax, accounting, and SEBI rules. These additions provide a clearer legal framework for various equity-based compensation models used by modern corporations.

Furthermore, the Bill proposes doubling the thresholds for what constitutes a "small company." The limits would rise from Rs 10 crore in paid-up capital and Rs 100 crore in annual turnover to Rs 20 crore and Rs 200 crore, respectively.

While this does not automatically reclassify existing businesses, it allows the government to prescribe higher thresholds that could grant more private companies access to simpler compliance rules. The Bill also proposes decriminalizing several procedural defaults and creating a valuation framework under the Insolvency and Bankruptcy Board of India.