A new corporate law bill was introduced in Parliament on March 23: The Corporate Laws (Amendment) Bill, 2026. The bill proposes extensive changes to the Companies Act, 2013, and the Limited Liability Partnership (LLP) Act, 2008, and aims to strengthen governance while ensuring ease of doing business. The bill emphasises practicality: removing friction, making enforcement and punishments in line with violations, updating and modernising internal governance workflows, and concentrating regulatory discipline where it matters, in high-risk areas. As of now, the bill has been referred to a joint parliamentary committee for scrutiny and other stakeholder inputs, after which it will be returned for final consideration.
A key feature of the bill is the approach to small companies: for one, thresholds may expand, with paid-up capital going up from ₹10 crore to ₹20 crore and turnover from ₹100 crore to ₹200 crore, bringing more growth-stage companies into the fold. This is just one of the proposals that will have an impact on small companies — here’s a more detailed look.
Redefining small companies
One of the most important shifts in the Corporate Laws (Amendment) Bill, 2026 as mentioned above, is the expansion of what qualifies as a small company. The thresholds have been increased to ₹20 crore in paid-up capital and ₹200 crore in turnover. This means a large number of growing startups and mid-sized businesses who earlier faced heavier compliance, will now fall under the “small company” category.
The benefit: In practical terms, this reclassification directly reduces regulatory burden and places small companies under a more relaxed compliance framework.
Structural flexibility
The bill proposes to make business restructuring easier. It enables certain trusts to convert to Limited Liability Partnerships (there are provisions for the conversion of “Specified trusts” into LLPs), and simplifies regulatory requirements for specific LLP categories. This enables a smoother transition from one structure to another.
The benefit: This allows small companies the benefit of easier restructuring when scaling or pivoting, and the freedom to choose more tax-efficient or operationally suitable structures.
Fundraising and capital flexibility
The proposed amendments also allow for more flexibility in how companies can structure financial instruments, including those linked to share value (such as ESOPs). This brings company law in line with modern executive compensation practices, giving companies the option to design competitive reward schemes. This is particularly useful for startups and growth-stage companies.
The benefit: Small companies will be able to design better employee incentive structures and attract talent, and raise capital with fewer constraints.
Less compliance burden
One of the aims of the bill is to make business easier, by reducing compliance burdens and friction in getting things done. Earlier, even the most basic and routine corporate actions required multiple filings, certifications, and layers of paperwork and documentation. Now, many of these processes are simplified or consolidated. This translates into fewer repetitive filings, faster execution, and less dependency on external compliance agencies and professionals.
The benefit: Small teams can use their time and resources to run the business and grow it, rather than focusing on documentation and navigating procedural hurdles.
Raising governance standards and board accountability
While the bill reduces compliance burden, it simultaneously raises expectations around governance quality. Boards are now required to provide clearer explanations on auditor remarks, and companies must disclose whether audit committee recommendations were accepted. Companies need to maintain proper board minutes, document their decisions clearly, and be transparent in all financial reporting.
The benefit: For small companies, this adds a layer of discipline in all their dealings and may also improve credibility, an added benefit if the firm is planning to raise funds or scale further.
Proportionate penalties fitting the nature of non-compliance
A big change lies in how defaults will be dealt with: the consequence for several defaults (including for defaults like name reservation, prospectus, meetings, books of accounts, improper use of the words “limited” and “private limited”, etc) are being shifted from “fine/prosecution” to “civil penalty.” Defaults that earlier involved prosecution now impose fixed monetary penalties, with clear caps. For small companies, this creates a much safer compliance environment. Minor mistakes such as delays in filings or technical errors are decriminalised and will likely not escalate into serious legal exposure.
The benefit: Small companies are now safe from criminal consequences for routine or technical lapses. Founders and directors are at lower risk of litigation or prosecution, which may allow them to step away from overly conservative decision-making.
Fast and efficient operations with digital governance
In keeping with the government’s digitisation drive, the bill pushes companies toward a digital-first governance model. It proposes far less paperwork and faster communication and coordination by formally recognising electronic communication, virtual meetings, and hybrid formats for shareholder interactions. AGMs and EGMs may be held physically, via video conferencing other audio-visual means and may even be conducted in hybrid mode (wholly or partly), subject to prescribed conditions.
The benefit: For small companies, this lowers administration costs like printing and couriers, removes logistical hurdles for remote founders and investors, and improves accessibility.
A net positive for small companies?
The bill represents a clear shift in regulatory philosophy: it reduces friction in routine operations while strengthening guardrails in important areas like financial reporting and governance. Many of the proposals point to an important shift towards better governance practices, financial discipline, and more transparency in operations and reporting. And for small companies, the overall effect is largely positive: businesses will incur lower compliance costs, reduce legal risks, and may become easier to operate.
Sources
THE CORPORATE LAWS (AMENDMENT) BILL, 2026
EY Regulatory AlertTHE CORPORATE LAWS (AMENDMENT) BILL, 2026
Regulatory Alert – Corporate Laws Amendment Bill 2026 | EY – India