This article is written by Navya Tiwari, a law student at ICFAI University, Dehradun, with a keen interest in Corporate Governance and Alternative Dispute Resolution (ADR).
The Corporate Laws (Amendment) Bill, 2026 passing in the Lok Sabha is a step forward for corporate regulation in India. The changes to the Companies Act 2013 are a shift in how corporations are regulated. This change is about how companies governed and financial rules are enforced. It is based on ideas from the 2025 High Level Committee on -financial Regulatory Reforms. The committee suggested making some technical mistakes not punishable going new rules. In this paper we look at the change in the Bill. The Bill moves away from following rules to a system where actions have real consequences.
The changes will help with some procedures. They also show that the current laws are not fully suited to today’s corporate world. The Corporate Laws (Amendment) Bill 2026 is a part of this change. It aims to update the Limited Liability Partnership Act, 2008 and the Companies Act, 2013. The Companies Act 2013 will have rules. These changes are important for regulation in India. The Bill is a step, towards making regulation in India better.
The Systemic Decriminalization and Civil Penalty Regime
Probably the important change in the theme of the Bill is the move from a criminal to a civil penalty system in case of procedural default. The Bill wants to make a difference between small mistakes and real fraud by imposing fines instead of sending people to jail.
For example, if a company issues a prospectus without following the rules as per Section 26(9) the officer in charge used to face a fine of ₹50,000 to ₹3 lakhs. Up to three years in jail. Now the company and the party issuing the securities will only have to pay a fixed penalty of ₹2 lakhs. If a company does not follow the buyback provisions as per Section 68(11) it used to attract a fine of ₹1 lakh to ₹3 lakhs and three years in jail. Now the listed company will have to pay a penalty of ₹25 lakhs and the defaulting officer will have to pay ₹5 lakhs.
This change is also applicable in cases of failure to maintain books of accounts as per Section 128(6) and acting as a director after leaving office as per Section 167(2). Now of a prison sentence a maximum civil fine of up to ₹5 lakh can be imposed. The penalty for placements as per Section 42(10) will be made stricter. The penalty will be equal, to either the amount raised or ₹2 crore whichever’s smaller.
These changes do not affect the markets integrity. They aim to make the system fairer and more reasonable.
The Reconstruction of Financial Oversight: NFRA and the Valuation Authority
This Bill changes how Indias financial sector is regulated. The National Financial Reporting Authority (NFRA) was setting standards. Now it will become a full-fledged regulator with eleven new powers. The proposed changes make NFRA a body corporate. Give it more jurisdiction. A new system of discipline will be set up. The new Bill gives NFRA the power to:
- charge fees on auditors
- give directions in the interest
- levy fines
If someone does not follow NFRAs orders within ninety days they will face penalties.
These penalties include:
- imprisonment for up to six months
- a fine of ₹1 lakh to ₹5 lakh for individuals
- a fine of ₹5 lakh to ₹25 lakh for firms
- debarment
The Insolvency and Bankruptcy Board of India (IBBI) is now the Valuation Authority. This change aims to make the valuation industry more professional. To achieve this IBBI will set qualification and registration criteria for ” valuers”. All valuations under the Act must be done by ” valuers”. These valuers are, under IBBIs jurisdiction.
If a registered valuer breaks the rules they can be:
- Warned
- have their certificate suspended for ten years
- fined up to ₹10 lakhs
A new rule makes valuation fraud a criminal offense. This offense can only be investigated if IBBI or the Central Government files a written complaint.
Auditor Independence and the Post-Tenure Advisory Restriction
The proposed extension of Section 144 is really important. Section 144 is a rule that stops auditors of companies from doing other work for these companies. This includes work for the company that owns them or for companies that they own. The auditors cannot do this work for three years after they finish checking the company’s accounts, which is required by Section 139(2).
Before auditors were only stopped from doing work while they were checking the company’s accounts. Now the rule is that they cannot do work for a much longer time. This has completely changed the way companies do business with auditors and the way auditors plan their work with Section 144, in mind. The extension of Section 144 has made a difference to the business strategy of companies that have to follow Section 144.
Digital Governance and Risk Disclosure: The Unfinished Reform Agenda
Whereas the Bill gives a reason for using technology in company decisions allowing firms to have meetings through video calls and requiring some companies to have working websites the Bill misses several key changes. As company values depend more on data, online platforms and automation rules based on financial reports and following procedures seem only partly suitable. For companies that rely on technologies problems will happen because they cannot properly oversee these systems not because of financial issues. The “fit and proper person” test for directors in Section 164 of the Bill does not consider the risks these firms face. There is also no mention of needing directors to be good with data matters. It would be better to set standards, for directors of companies that rely on technology especially for managing data and cyber risks. The Section 12A that requires types of digital communication interfaces works separately from the Digital Personal Data Protection Act, 2023. A better approach would be to make these interfaces respect privacy from the start.
Conclusion
The Corporate Laws (Amendment) Bill, 2026 is a step forward for corporate financial oversight in India. It changes the way companies are regulated by focusing on the consequences of not following the rules. The Bill makes some procedural mistakes non-criminal. Gives more power to the National Financial Reporting Authority (NFRA) and the Insolvency and Bankruptcy Board of India (IBBI) to regulate their areas.
This new approach is a change for the Indian financial system. The NFRA and IBBI are now more independent. Have a clear framework to regulate valuers and financial reporting. The new rules mean that Chief Financial Officers (CFOs) and Audit Committees have to be more careful. They need to ensure that partners are properly registered and that they evaluate relationships with advisors. The Bill also brings in a process for dealing with discipline and criminal penalties for those who do not follow the rules. The business community, both in India and abroad will welcome these changes. This is because the changes directly address some of the risks that affect how Indian companies are valued.
However, there are still some areas that need improvement, such as governance and data protection. The journey to reform is not yet over. It will require a new approach to deal with these issues. The focus needs to shift from procedures to a more integrated approach. The Corporate Laws (Amendment) Bill, 2026 and the NFRA and IBBI are key, to this change.
