India Moves to Decriminalize Corporate lapses
Government leans further into compliance reform, betting that lower legal risk will encourage investment and formalization
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India this week moved to decriminalize minor corporate offences and ease compliance rules, marking the government’s latest push to simplify business regulations under the Companies Act and LLP framework.
Finance minister Nirmala Sitharaman on Monday introduced the Corporate Laws (Amendment) Bill, 2026 in the Lok Sabha, proposing changes to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008.
The Corporate Laws (Amendment) Bill, 2026 proposes to replace several criminal penalties for procedural lapses with monetary fines, aiming to reduce litigation and improve ease of doing business.
Sitharaman said the changes are intended to lower compliance burdens and streamline regulatory processes.
The proposal was referred to a joint parliamentary committee after opposition members, including Congress member of Parliament Manish Tewari, Trinamool Congress’s Sougata Ray and the Dravida Munnetra Kazhagam’s Dr T. Sumathy, raised concerns.
The amendments are based on recommendations from the Company Law Committee, set up in September 2019 to review corporate regulations, and later examined by the High-Level Committee on Non-Financial Regulatory Reforms chaired by former cabinet secretary Rajiv Gauba.
The panel included former Lok Sabha secretary general T.K. Viswanathan, Kotak Mahindra Bank managing director Uday Kotak, Shardul Amarchand Mangaldas executive chairman Shardul S. Shroff, chartered accountant G. Ramaswamy and Xpro India chairman Sidharth Birla.
Among the key proposals, companies may be allowed to communicate with shareholders exclusively in electronic form, while general meetings could be held in virtual, physical or hybrid formats.
The bill also seeks to ease capital-raising norms for distressed firms, permit self-certified affidavits in certain cases and strengthen the National Financial Reporting Authority’s oversight role.
In addition, it proposes to bar the conversion of co-operative societies into companies, a move that could have implications for governance structures in certain sectors.
The latest changes build on a broader government effort to shift corporate regulation away from criminal enforcement toward a civil penalty regime, a trend that has gathered pace in recent years.
Separately, Sitharaman also introduced the Finance Bill, 2026, outlining the government’s tax proposals for the fiscal year starting 1 April 2026. The bill will require approval from both houses of Parliament before becoming law.
