Author name: rajul1jain@gmail.com

Introduction On 23 March 2026, the Corporate Laws (Amendment) Bill, 2026 was introduced in the Lok Sabha, proposing one of the most extensive updates to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008 in over a decade. With more than a hundred clauses, the Bill touches almost every part of corporate life in India: how offences are punished, how small companies are defined, when CSR applies, how shareholder meetings are held, how mergers are approved, and how auditors and valuers are regulated. The Bill has been referred to a Joint Parliamentary Committee and may change before enactment. Even so, boards, company secretaries, CFOs and investors should understand its direction now, because several changes will require updates to compliance calendars, board processes and transaction planning soon after notification. This article breaks down the key changes for directors, shareholders, ROC compliance and private companies, and ends with a practical compliance checklist. What is the Corporate Laws (Amendment) Bill, 2026? The Corporate Laws (Amendment) Bill, 2026 is a single legislative package that amends two central statutes together: the Companies Act, 2013 and the LLP Act, 2008. It carries forward the recommendations of the Company Law Committee Report, 2022 and the High-Level Committee on Non-Financial Regulatory Reforms, 2025. In simple terms, the Bill does four things: Decriminalises minor and procedural offences by replacing imprisonment with monetary penalties imposed through electronic adjudication. Simplifies compliance by raising small company and CSR thresholds and rationalising filings. Digitises corporate functioning through virtual and hybrid general meetings, electronic service of documents and mandatory digital presence for prescribed companies. Strengthens accountability where public interest is highest, by empowering the National Financial Reporting Authority (NFRA), designating a single Valuation Authority and tightening auditor independence and board disclosures. Legal Framework: Applicable Acts, Rules and Authorities Companies Act, 2013: Being amended across incorporation, meetings, buy-backs, charges, CSR, audit, mergers (Sections 230–233) and penalties. LLP Act, 2008: Amended mainly for IFSC LLPs, valuation, trust-to-LLP conversion and penalty adjudication. Ministry of Corporate Affairs (MCA): Administers both Acts, notifies rules and prescribed thresholds, and operates the ROC and e-adjudication system. ROC and Regional Directors: Registrar of Companies for filings and adjudication of penalties; Regional Directors receive statutory recognition under the Bill. NFRA: Restructured as a statutory body corporate with registration, investigation, direction and penalty powers over prescribed auditors. Insolvency and Bankruptcy Board of India (IBBI): Proposed as the single Valuation Authority for registered valuers. NCLT, SEBI and IFSCA: NCLT for schemes of arrangement and disputes; SEBI and IFSCA for regulated entities that get filing relief under the Bill. Applicability: Who Needs to Pay Attention? Private limited and small companies: Gain the most from higher small-company thresholds, CSR relief and decriminalisation. Directors and KMP: Face new disclosure duties, tightened qualification norms and personal penalty exposure as officers in default, even as criminal risk for technical lapses falls. Shareholders and investors: Benefit from hybrid/virtual meetings, buy-back flexibility and reformed IEPF refund processes; must watch easier merger approvals more closely. LLPs: Affected by the extended registered valuer framework, penalty adjudication reforms and the new IFSC LLP regime with foreign-currency accounting. Auditors and audit firms: Come under a far stronger NFRA and a three-year post-tenure cooling-off on certain services. Foreign-owned Indian subsidiaries: Benefit from simpler financial year alignment with overseas parents and easier fast-track mergers. Key Legal Requirements and Changes 1. Changes for Directors Decriminalisation with continued accountability: Around 21 minor and technical offences move from criminal courts to civil penalties through e-adjudication. Example: a delay in furnishing documents to the ROC would attract a monetary penalty, not prosecution. However, serious offences such as fraud remain criminal, and directors continue to be liable as “officers in default”. New Section 134 disclosures: The Board’s Report must explain adverse auditor observations and disclose, with reasons, any Audit Committee recommendation the Board rejected. Minutes and agenda papers must capture these deliberations. Stricter qualification criteria: The Bill tightens director qualification and vacation-of-office provisions, making proactive DIN and disclosure hygiene essential. Incorporation declarations: Professionals certifying incorporation documents (advocates, CAs, CSs, cost accountants) must give their own declarations, raising accountability at the setup stage. 2. Changes for Shareholders Hybrid and virtual general meetings: AGMs and EGMs may be physical, virtual or hybrid, with at least one physical AGM required every three years. Practical example: a company with NRI investors can now lawfully hold fully virtual AGMs in two out of every three years. Buy-back flexibility: Prescribed companies may exceed existing buy-back limits and make up to two buy-back offers in a year, with a minimum six-month gap between offers. Easier fast-track mergers: Fast-track mergers under Section 233 will need approval by a majority of members present and voting holding at least 75% of shares present and voting, instead of 90% of total shares; the creditor threshold also falls from 90% to 75%. IEPF reforms: Refund procedures under the Investor Education and Protection Fund are restructured, and unclaimed amounts from extinguished buy-back shares flow into the IEPF. Employee compensation schemes: Share-linked employee compensation beyond classic ESOPs (RSU and SAR-style plans) gets statutory recognition, affecting dilution and disclosure. 3. Changes for Private and Small Companies Higher small-company thresholds: The paid-up capital ceiling rises from INR 10 crore to INR 20 crore and turnover from INR 100 crore to INR 200 crore. Many more private companies will qualify for lighter compliance: fewer board meetings, abridged annual returns and lower penalties. CSR relief: The net-profit trigger for mandatory CSR rises from INR 5 crore to INR 10 crore, the CSR Committee exemption threshold rises from INR 50 lakh to INR 1 crore, and timelines for transferring unspent CSR amounts are extended. Financial year alignment: A simpler route to adopt a financial year other than April–March helps subsidiaries of foreign groups align reporting with their parent. Charge registration relief: Prescribed companies get additional time under Section 77 to register charges, protecting lender security from procedural delays. 4. Changes in ROC Compliance Digital presence (new Section 12A): Prescribed companies must maintain a website, official email and electronic communication

Introduction India received over USD 70 billion in Foreign Direct Investment in FY 2023-24, making it one of the top five FDI destinations globally. The attraction is clear: a large domestic market, a skilled workforce, improving infrastructure and a government that has systematically liberalised the FDI regime over the last decade. More than 90% of India’s commercial sectors now accept foreign investment without prior government approval. But FDI compliance in India is not a one-time checkbox. It is a structured, ongoing obligation that begins before the investment arrives and continues every year thereafter. Missing an FC-GPR filing deadline, issuing shares below fair market value, investing in a restricted sector, or failing to file the annual FLA return are each FEMA contraventions that attract penalties, require RBI compounding, and in some cases trigger ED scrutiny. Understanding the regime in full — routes, caps, instruments, pricing, filing and penalties — is the starting point for any foreign investor entering India. This guide covers the complete FDI compliance framework as it stands under the FEM (Non-Debt Instruments) Rules, 2019, the current DPIIT Consolidated FDI Policy, and RBI Master Directions, updated to reflect 2025-2026 regulatory developments. What Qualifies as FDI Under Indian Law Foreign Direct Investment is defined under the FEM (Non-Debt Instruments) Rules, 2019 as investment by a non-resident in the equity instruments of an Indian company or in the capital of an LLP, where the investment gives the foreign investor ten percent or more of the post-issue paid-up equity share capital of the company (or ten percent or more of the capital of the LLP). Investment below ten percent is treated as Foreign Portfolio Investment (FPI) and is governed by a separate SEBI-FEMA framework. Two points frequently cause confusion in practice. First, the ten percent threshold is calculated on a fully diluted basis — including all outstanding options, warrants and convertible instruments — not just paid-up equity. Second, the ten percent threshold applies at the time of initial investment; once a person is categorised as an FDI investor, the category persists regardless of subsequent dilution below ten percent. FDI is investment in equity instruments that gives ten percent or more of post-issue paid-up equity on a fully diluted basis. Below ten percent = FPI, governed by SEBI. Different route, different regulator, different compliance obligations. Automatic Route vs Approval Route — The Core Distinction Every FDI transaction begins with one question: does this investment require prior government approval or can it proceed immediately under the automatic route? Automatic Route Under the automatic route, a non-resident investor can remit capital to an Indian company, the Indian company allots equity instruments, and the transaction is reported to the RBI after the fact through the FIRMS portal. No prior approval from the RBI, DPIIT or any ministry is required. This route applies to over 90% of sectors, including IT, manufacturing, infrastructure, renewable energy, e-commerce (marketplace model), pharmaceuticals (greenfield), food processing, and logistics. Government Approval Route The approval route applies to sectors where public policy, national security or strategic considerations require prior executive review. Under this route, the foreign investor must submit an application through the Foreign Investment Facilitation Portal (FIFP) managed by the DPIIT. The DPIIT routes the application to the relevant administrative ministry or department, which evaluates the proposal and grants or refuses approval. Only after approval is received can the investment be made and reported. Key sectors currently requiring government approval include defence manufacturing above 74%, broadcasting content services, print media (daily newspapers and periodicals dealing in news and current affairs), satellite establishment and operations, multi-brand retail trading, and private security agencies. Press Note 3 of 2020 — The Land Border Override ⚠ Press Note 3 (2020 Series): Any investment from a country that shares a land border with India — China, Pakistan, Bangladesh, Myanmar, Nepal, Bhutan — or where the ultimate beneficial owner is a citizen or resident of such a country, requires prior government approval regardless of sector. This applies even to sectors under the automatic route. The rule covers direct investors and beneficial owners across all layers of the investment structure. Identifying and disclosing the complete beneficial ownership chain is mandatory for every FDI transaction. Prohibited Sectors: Where FDI Is Not Permitted FDI is completely prohibited in the following activities, regardless of the investment route, ownership structure or percentage: Lottery business, gambling, betting and casinos (including online formats). Chit funds and Nidhi companies. Trading in Transferable Development Rights (TDRs). Real estate business and construction of farm houses (not including real estate development — townships, commercial buildings, infrastructure — which is permitted). Manufacturing of cigars, cheroots, cigarillos and cigarettes, and tobacco and tobacco substitutes. Atomic energy (reserved for the public sector under the Atomic Energy Act, 1962). Railway operations (other than those specifically permitted). Foreign Technology Collaboration in the lottery sector. ⚠ Investing in a prohibited sector is not a penalty-attracting FEMA contravention — it is a fundamental breach of the FDI framework. The investment is void, the shares issued are invalid, and unwinding the structure involves compounding with the RBI, refund of the foreign remittance and, in some cases, ED investigation. Due diligence on sector eligibility before investing is non-negotiable. Key Sectoral Caps — What Foreign Investors Must Check Where FDI is permitted, it may be subject to a maximum percentage cap on foreign ownership. The following are the most frequently encountered sectoral caps under the current FDI Policy: Sector Cap Route Key Condition Most manufacturing, IT, services 100% Automatic No special conditions Defence manufacturing 74% automatic; beyond 74% government Automatic / Government Security clearance; licence from MoD Pharmaceuticals — Greenfield 100% Automatic No conditions Pharmaceuticals — Brownfield Up to 74% automatic; beyond government Automatic / Government Subject to conditions on technology transfer Insurance 74% Automatic IRDAI registration; Indian management control Banking — Private 74% Automatic up to 49%; Government beyond RBI fit and proper criteria Telecom 100% Automatic up to 49%; Government beyond Security conditions; DoT licence E-commerce — Marketplace 100% Automatic No inventory model; no preference to related