India’s Corporate Law Reform in Progress: The Corporate Laws (Amendment) Bill, 2026 and FDI Policy Updates
India’s corporate and investment regulatory framework is evolving with a focus on ease of doing business. The introduction of the Corporate Laws (Amendment) Bill, 2026 in the Lok Sabha proposes to simplify and modernize key provisions under the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. At the same time, Press Note 2 (2026) to the FDI Policy, issued by the Department for Promotion of Industry and Internal Trade (DPIIT), revisits India’s approach to foreign investments from land-border sharing countries.
While the corporate law amendments proposed focus on reducing compliance burdens and improving flexibility for businesses, Press Note 2 brings much-needed clarity to the FDI regime, particularly by defining “beneficial ownership” and setting clearer rules around control and approvals. In doing so, it seeks to resolve ambiguities and gaps that had created practical challenges under the earlier framework.
A. Corporate Laws (Amendment) Bill, 2026
On March 23, 2026, the Union Government introduced the Corporate Laws (Amendment) Bill, 2026 (“Bill”), in the Lok Sabha, proposing significant changes to the Companies Act, 2013 (“Companies Act”), and the Limited Liability Partnership Act, 2008 (“LLP Act”). Notably, the reforms build upon recommendations of the Company Law Committee (CLC) and the High-Level Committee on Non-Financial Regulatory Reforms, underscoring a broader policy shift toward trust-based governance and simplified compliance frameworks.
Proposed Amendments to the Limited Liability Partnership Act, 2008
The proposed amendments to the LLP Act reflect a clear inclusion of International Financial Services Centre (‘IFSC’) related structuring, likely aimed at aligning it with evolving financial sector regulations and global investment practices. At the same time, several provisions are framework-based and reliant on subordinate legislation, which will play a key role in shaping their practical implementation, if and when brought into force. The key amendments proposed at a glance are set out below:
Alignment with the IFSC Framework:
A major development is the introduction of a “Specified IFSC LLP” category. The amendments propose:
- Inclusion of definitions with respect to Specified IFSC LLP.
- Foreign currency capital contributions, accounting and bookkeeping for such LLPs.
- Other regulatory provisions for incorporation, listing and operation of such LLPs.
These changes aim to align LLPs operating in IFSCs with global financial practices and the regulatory framework of the International Financial Services Centres Authority Act, 2019.
Incorporation Process Changes:
The amendments simplify incorporation by allowing subscriber-level self-declaration, with professional certification required only where such professionals are engaged by the LLP in the formation / incorporation process.
Adjudication:
- LLPs and partners may apply for suo motu adjudication of penalties under the proposed introduction of Section 76A.
- Section 68B is proposed to be introduced which permits appeal against Registrar’s decision regarding the application for Name and / or Registered Office of the LLP by any person aggrieved by such order. The effectiveness of this provision will depend on the rules specifying the officer, the period for filing, and the standard of review.
Valuation Framework:
The amendments propose to enable mutatis mutandis applicability of the registered valuer framework under Section 247 of the Companies Act, 2013 to valuations required in respect of partners’ contributions in an LLP, or of any property, assets or net worth of an LLP, ensuring uniformity across different body corporates by bringing LLP valuations under the same professional discipline as company valuations.
Conversion of Trusts into LLPs:
Another notable proposed amendment is the inclusion of a new framework to enable conversion of specified trusts into LLPs, supported by a detailed schedule covering:
- Eligibility and consent requirements
- Vesting of assets and liabilities
- Continuity of proceedings and contracts
This amendment will also facilitate the conversion of Alternative Investment Funds formed as trusts into LLPs.
“Specified Trusts” would mean trusts that meet both of the following conditions: (i) it should be a trust established under the Indian Trusts Act, 1882 or a Central or State Act; and (ii) the trust must be registered either with SEBI or IFSCA. Accordingly, it can be inferred that private family trusts, charitable trusts, or other trusts (not registered with SEBI or IFSCA) are excluded from the definition of specified trusts and, hence, cannot be converted into an LLP.
Proposed Amendments to the Companies Act, 2013
The Bill marks yet another step in India’s ongoing effort to recalibrate its corporate regulatory framework, building on a series of amendments introduced over the years to refine the Companies Act, 2013. It seeks to rationalize compliance requirements, decriminalize minor offences, recognize new concepts, and facilitate ease of doing business, reflecting the government’s continued push toward a more business-friendly and streamlined legal environment.
The Bill introduces several measures aimed at simplifying compliance burdens and modernizing corporate processes. Some key changes proposed under the Bill, that will lessen the burden and pave the way for ease of regulatory compliance are summarized in the below table:
| Section | Existing Provision | Proposed Key Change |
| 2(85) | Small Company threshold: Paid-up share capital up to ₹10 crore; turnover (for immediately preceding financial year) up to ₹100 crore. | Thresholds enhanced: Paid-up share capital up to ₹20 crore; turnover (for the immediately preceding financial year) up to ₹200 crore. |
| 42 & 62 | Private placement and further issue of share capital linked to ESOP. | Expanded to include other schemes linked to share capital value (Restricted Stock Units, Stock Appreciation Rights) |
| 68 | – Limit of buyback capped at 25% – Only 1 buy-back per year – Declaration of solvency to be verified by affidavit. |
– Central Government shall prescribe different buy-back percentages for certain classes of companies. – Prescribed companies may make 2 buybacks per year with minimum 6-month gap (likely to include debt-free companies) – No affidavit required.
|
| 77 | Registration of Charge to be completed within 60 days of creation. | For a prescribed class of companies, the registration period is extended to 120 days.
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| 96 | A physical AGM is required every year. | Company can hold an AGM through audiovisual means, with at least 1 physical meeting every 3 years. |
| 101 | Extraordinary general meetings (EGMs) require 21 days’ notice. | EGMs conducted wholly through video conferencing or audiovisual means may be called by 7 days’ notice. |
| 135 | – CSR applicable if net profit ≥ ₹5 crore – CSR Committee required if CSR spend ≥ ₹50 lakh. – Unspent amounts are to be transferred within 30 days. | – Net profit threshold raised to ₹10 crore. – CSR Committee not required if amount to be spent is ≤ ₹1 crore. – Timeline for transfer of unspent amounts extended to 90 days. |
| 173 | 2 Board meetings every calendar year for small, dormant, and one-person companies. | Reduced to 1 meeting every calendar year. |
| 184 | Disclosure of interest of directors is to be disclosed every year. | Disclosure of interest of directors is required only upon a change in interest. |
| 248 | Grounds for strike-off by RoC: – Company not carrying on business/operations for 2 financial years; no returns filed. – Filing an application with false information: fine up to ₹1 lakh. | Additional grounds were added for striking off (which were earlier the grounds for applying for the status of dormant company): – No significant accounting transaction in preceding 2 years and current FY; financial statements/annual returns not filed for 2 consecutive years preceding previous FY; – Offence of fraudulent strike-off application decriminalised to ₹50,000 penalty. |
| 230 and 232 | Scheme of arrangement involving multiple states requires adjudication by multiple NCLT benches. | – Single NCLT (jurisdiction of transferee/resulting company) to dispose off the entire scheme; – No need for multiple bench proceedings; – Demerger schemes will not require an Official Liquidator report. |
| 233 | Fast-track mergers: – Approval of 90% majority of creditors in value – Approval of majority members representing 75% in value – The Regional Director (RD) may approach NCLT if the scheme is not in the public interest. | Changes to the fast-track merger process: – Creditor approval reduced to 75% in value (from 90%) – Member approval: Majority in number representing 75% in value (twin test) – RD to approach only the NCLT having jurisdiction over transferee/resulting company – Central Government to prescribe procedure by rules. |
Decriminalization of certain offences/defaults:
One of the central and key proposals of the Bill is the decriminalisation of various procedural defaults under the Companies Act by replacing criminal enforcement provisions with a penalty-based adjudication regime. Under the previous framework, even minor compliance lapses could lead to prosecution before competent forums.
Defaults related to accounts, audits, director duties, vacation of office, and contravention of prospectus rules, which earlier carried criminal fines, now attract fixed civil penalties ranging from Rs. 50,000 to Rs. 2,500,000 depending on the type of offence and whether the company is listed or unlisted.
On compounding and fraud, the Regional Director’s limit to compound offences is proposed to rise from ₹50 lakh to ₹1 crore, and the fraud threshold for mandatory six-month imprisonment is proposed for a significant ₹10 lakh to ₹25 lakh. Such enhancement of monetary thresholds of fines for compounding of offences is proposed so as to reduce the burden on the National Company Law Tribunal.
Other key changes proposed:
The Bill also aims at strengthening oversight in critical areas such as auditing and financial reporting by introducing Sections 132A–132K of the Companies Act, 2013 to explicitly give powers to the National Financial Reporting Authority (NFRA).
Board powers are also proposed to be curtailed by limiting the tenure of additional directors to a maximum of three months or until the next general meeting. The director eligibility criteria are proposed to be expanded to include disqualifications for recent professional relationships with the company/group and the introduction of “fit and proper” criteria, collectively moving toward a more robust, transparent, and accountability-driven governance structure.
The Bill also proposes simplification of procedures relating to voluntary strike-off of companies to facilitate quicker and simpler closure or voluntary exit for companies and simplification and rationalization of the procedures relating to mergers and amalgamations, including fast-track mergers.
B. Press Note 2 (2026) of FDI Policy: A More Defined Regime for FDI from Land-Border Countries
India’s approach to foreign direct investment from countries sharing land borders has witnessed a significant shift with the issuance of Press Note 2 (2026) on 15 March 2026 (“PN2”). While the erstwhile framework introduced under Press Note 3 (2020) (“PN3”) continues in substance, the 2026 update brings much-needed clarity and enforceability to the regime.
PN3 was introduced in the backdrop of the COVID-19 pandemic, with the stated objective of preventing opportunistic acquisitions of Indian companies. It mandated that any investment from an entity incorporated in, or a citizen of, a country sharing a land border with India, or where the beneficial owner of such investment was situated in or was a citizen of such a country, would require Government approval. While the intent was clear, the framework left a critical gap: the concept of “beneficial ownership” was not defined. This created interpretational uncertainty, particularly in cases involving layered offshore structures, because there was no clarity on whether the concept of beneficial ownership was to be considered from the Companies Act, 2013, under the Companies (Significant Beneficial Owners) Rules 2018 or under the Prevention of Money Laundering Act, 2002 (PMLA), under the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (together referred to as “PMLA”).
PN2 addresses this gap directly by linking “beneficial ownership” to the definition under the PMLA. By importing a well-established anti-money laundering standard, the Government has effectively moved from a broad, principle-based restriction to a rule-based test. Beneficial ownership is now determined with reference to objective thresholds and control parameters, including shareholding levels and the ability to influence management or policy decisions. As a result, the inquiry is no longer limited to the immediate investing entity; it extends to identifying the ultimate beneficial owners (natural persons) who own or control the investment, directly or indirectly.
PN2 also expands the concept of control. It recognises that ownership alone may not capture the true locus of influence and therefore brings within its scope situations where investors exercise control through contractual rights or other arrangements. The reference to “ultimate effective control” over the investee entity signals a clear intent to look beyond formal shareholding and examine the substance of rights and relationships. This has direct implications for common deal constructs such as shareholder agreements, veto rights, and governance arrangements, which may now be relevant in determining whether the Government route is triggered.
Another important clarification relates to transfers of ownership. While PN3 required Government approval for transfers resulting in restricted beneficial ownership, PN2 makes it explicit that such approval must be obtained prior to the transfer. This removes any scope for post-facto regularisation and places the onus on parties to assess regulatory triggers at the structuring stage itself. In practice, this is likely to affect secondary transactions, internal reorganisations, and exit mechanisms, all of which will now require closer regulatory scrutiny.
A notable addition under PN2 is the introduction of a reporting requirement even in cases where prior Government approval is not required. Investments that have any direct or indirect ownership linkage to a land-border country are now subject to reporting in accordance with procedures prescribed by DPIIT. This reflects a shift towards continuous regulatory oversight, where the Government retains visibility over investments beyond those that formally trigger approval thresholds.
Taken together, these changes indicate a clear evolution in India’s FDI policy. The emphasis is no longer merely on restricting certain categories of investors at the entry stage but on making an analysis of beneficial ownership and control through other means and ensuring that ownership and control can be effectively traced and monitored throughout the life of the investment.
Concluding Thoughts
The Corporate Laws (Amendment) Bill, 2026 reflects a calibrated regulatory approach – liberalisation for procedural non-compliance, coupled with stricter oversight in substantive areas such as auditing and financial reporting. For businesses, the reforms promise reduced compliance friction and improved operational flexibility. For regulators, they provide enhanced tools to ensure accountability in critical areas. If enacted, the amendments are likely to improve investor confidence, streamline compliance frameworks, and strengthen India’s position as a globally competitive corporate jurisdiction.
Press Note 2 (2026) of the FDI Policy does not mark a departure from Press Note 3 (2020). Instead, it refines and strengthens that framework by providing definitional clarity, tightening approval requirements, and introducing ongoing reporting obligations. In practical terms, all parties to a transaction and transaction counsel will need to adopt a more rigorous approach to ownership mapping and control analysis. The regulatory focus has clearly shifted to substance, and compliance will depend on a careful assessment of both ownership and control at every level of the investment chain. The corresponding amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 are awaited, which will be critical in translating these policy changes into operational clarity and guiding their practical implementation.
Viewed together, these developments reflect a pragmatic shift in India’s regulatory approach. The combined effect of these changes / proposed changes would be a more predictable and business-friendly environment where regulation is clearer and easier to navigate.
The Corporate Laws (Amendment) Bill, 2026 reflects a calibrated regulatory approach – liberalisation for procedural non-compliance, coupled with stricter oversight in substantive areas such as auditing and financial reporting. For businesses, the reforms promise reduced compliance friction and improved operational flexibility. For regulators, they provide enhanced tools to ensure accountability in critical areas.