Tanishka Mishra and Tanay Salwe
On 23 March 2026, Finance Minister Nirmala Sitharaman presented the Corporate Laws (Amendment) Bill, 2026 (“the Bill”) in the Lok Sabha and suggested a lot of changes in the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. The Bill is sent directly to a Joint Parliamentary Committee (JPC) and was the first single statute decriminalisation attempt in the corporate law field in India. The advocates of it present it as a form of proportional recalibration regarding the relationship between the regulating default and the punishment. Its opponents claim that it emaciates parliamentary checks and balances by going too far in delegation and erodes corporate governance protections. This article asserts that the macro direction in the Bill is doctrinally sound but its implementation indicates structural weaknesses in the delegated legislation structure and the CSR reform system that needs to be tackled by the legislature prior to its signing. Existing commentary on the Bill has largely mapped its four reform axes without testing the delegation clauses against constitutional doctrine or asking whether the enforcement architecture can sustain the deterrence the Bill assumes; this piece confines itself to those two questions.
I. The Decriminalisation Trajectory
The Indian corporate compliance structure has traditionally been plagued by excessive use of criminal sanctions in addressing technical and procedural default. The CA 2013 as it appeared initially criminalised about 81 of its 470 provisions, such as failure to file within a period, little or no disclosure failures with no element of mens rea. The criminalisation theory is based on the harm principle, according to which criminal consequences can only be applied in cases where the conduct brings about actual harm to the identifiable interests. It is the failure of the test to imprison a director, because of a gap in paperwork. The road of the reform in the legislative arena is clear. A total of 64 provisions were decriminalised by the Companies (Amendment) Acts of 2019 and 2020. The philosophy was furthered to 42 Central Acts by the Jan Vishwas (Amendment of Provisions) Act, 2023 which amended 183 provisions. The current Bill is statute based as opposed to omnibus. This difference is important: a legislatively defined tool can incorporate decriminalisation into a consistent philosophy of governing relations instead of seeing it as a cost-cutting compliance measure. The question is whether the Bill will achieve this or not.
II. Key Reforms and Their Analytical Weight
The most significant structural reform in the Bill is the giving of powers to the National Financial Reporting Authority under the name National Financial Reporting Authority in order to enact regulations on its own operations and separation of its investigation and disciplinary operations. Section 132 of the Companies Act, 2013 established NFRA in response to the inability of the Institute of Chartered Accountants of India’s (ICAI) self-regulatory paradigm, which had been revealed in the IL&FS and Satyam scandals. Nonetheless, CCI, IBBI, and SEBI, unlike other regulators, do not have the independent rule-makers. This is not an administrative convenience but rather an institutional design to give this power. The Bill also limits non auditory services of statutory auditors to deal with conflict of interest that will negate independence of audit work. This puts India in line with other post-Enron reforms such as Sarbanes-Oxley Act, 2002 and EU Audit Reform Directive, 2014 with a long-time lag.
The Bill enhances the merger processes by ensuring that the filings are only done in the presence of the NCLT bench of the resulting company which cuts the coordination challenges, jurisdictional problems and the related expenses. This is a one-window solution that will improve the efficiency of the procedure. It also brings about statutory clarity that no compromise or merger process under Companies Act, 2013 can be initiated or carried out after IBC liquidation has been initiated and this issue has been historically resolved inconsistently on a case-by-case basis.
The fact that Restricted Stock Units and Stock Appreciation Rights have long been regarded as legitimate forms of compensation is long overdue. Indian firms have been developing workarounds of different levels of legal assurance over the years. Statutory recognition decreases disclosure uncertainty and governance risk, insofar the rules that accompany the valuation and disclosure are set to an extent that enhances transparency without incurring compliance friction which kills the objective of the reform.
III. The Delegation Problem: A Constitutional Infirmity
The most analytically important objection which was made in Parliamentary debate was that the Bill by delegation vests in the executive certain necessary legislative powers, not properly directed by statute, in breach of the settled constitutional doctrine in Articles 245 and 246. Thresholds of compliance, quantum of penalty, Corporate Social Responsibility (CSR) requirements and audit requirements are wholly devolved to subordinate legislation with repeated as may be prescribed clauses.
This criticism is worth the consideration instead of rejection. The doctrine of delegation within certain limits as formulated in the case of In re: The Delhi Laws Act, 1912 and perfected in the case of Harishankar Bagla v. State of Madhya Pradesh holds that Parliament may delegate ancillary legislative functions, such as working out regulatory detail, but not essential legislative functions, namely the determination of legislative policy itself. Where the question of penalty quantum and criteria of classification is left to be decided by the executive by notification, there has been no Parliament legislation on the question. It has granted the executive the power to make law which is a constitutionally different act.
In comparison to primary law, delegated legislation does not receive the deliberative process that it does not involve parliamentary scrutiny and popular participation. The dependence on the deliberation by the Company Law Committee by government is not enough as the Company Law Committee is an executive process and it is not able to replace the policy making by parliament. Important standards of governance are set in statute, and probably ought to be set, as with Section 149(1) of the Companies Act, 2013. The reform agenda of the Bill should be of the same discipline. Parliament is advised to revise all as may be prescribed clauses and explicitly indicate the statutory and directive limits and principles of delegated issues.
IV. The CSR Controversy: Drafting Failure Disguised as Policy Dispute
The members of the Opposition claimed on the floor of Lok Sabha that the Bill weakens the compulsory CSR requirement in Section 135 of the CA 2013 by altering the requirements of computing net profits. Finance Minister Sitharaman made it clear that the 2 percent CSR requirement per se remains the same and that the amendment simply remodels thresholds in order to give relief to smaller companies.
The problem is not solved even when one acknowledges the reason given by the government. The alteration of the calculation of net profits under Section 198 may have the effect of shifting companies that are satisfied in the CSR requirements, making some companies currently covered obsolete on the threshold of 2 percent without altering the 2 percent rate. It is not clear whether this is the desired result of the Bill. In case Parliament wants to give or refuse such relief it must be made clear in the statute, not in the ministerial utterances. This failure is a drafting rather than a communication gap, and Parliament should address it before enactment. Early commentary on the clause has flagged the same threshold shift without tracing it to this drafting-transparency problem.
V. Does Decriminalisation Preserve Deterrence?
The ultimate governance issue that is embedded in the Bill is the ability of civil penalties to mimic the deterrence quality of the criminal punishment. According to the law-and-economics literature the opposite opinions exist. The advocates of administrative fines note that non-compliance can be best deterring by civil fines that will be adjusted to be more than is anticipated in terms of expected gains, and the social costs of over-criminalisation are minimised. According to critics, reputational and behavioural deterrence values of criminal prosecution are unavailable with monetary fines, especially in cases where corporate defendants can afford to pay a fine as a cost of conducting business.
The Indian situation is an additional complication. Proper civil penalties cannot be achieved without fast, consistent and strict administrative prosecution. Assuming the ROC adjudication under Section 454 of the CA 2013 is ineffective or with inconsistency in each instance, the deterrence will be reduced significantly irrespective of the amount of nominal punishment. The decriminalisation in Singapore, through the ACRA, shows that only the civil alternative is functional enough to make the decriminalisation a successful governance tool. The Bill does not focus on enforcement infrastructure. The legislature ought to make the introduction of the decriminalisation provisions subject to the release of rules defining the penalty matrices according to company size, length of default and recidivism instead of quantum being wholly at the discretion of the adjudicator.
VI. Conclusion
The Bill covers major reforms but it is ill-constructed. It transfers the core policy issues to the lower-level legislation without providing evident statutory guidance, which poses constitutional issues. Such ambiguity undermines governance as was the case with CSR. Decriminalisation without some vigorous enforcement will simply lead to a decrease in compliance and not regulation. The legislature has to make the Bill clear, robust and durable.
Tanishka Mishra and Tanay Salwe are both fourth year students at Gujrat National Law University(GNLU), Gandhinagar.
NUALS Law Journal 