A private company crossed Rs 50 crore in turnover last year. It is on track for Rs 150 crore. Does it count as a small company under the Companies Act, 2013? No. The turnover limit today is Rs 40 crore.

The Corporate Laws (Amendment) Bill, 2026 could change that. It doubles the highest turnover limit the government is allowed to set, from Rs 100 crore to Rs 200 crore.

That one number tells you what this Bill is for. It does not rewrite Indian company law. It moves the line between businesses that need close regulatory attention and businesses that can be left to get on with work.

Why This Bill Exists

The Companies Act, 2013 has been amended many times in ten years. Almost every round added compliance. Very little came off.

Smaller and mid-sized businesses have one complaint above all. The Act treats a late filing almost as seriously as deliberate fraud. Both can end in court.

The government's answer draws on the Company Law Committee (2022) and the High-Level Committee on Non-Financial Regulatory Reforms. The idea is simple. The punishment should match the risk. Go light where little harm is possible. Go hard where the harm is real.

That idea runs through the whole Bill. It also explains why some regulators come out of it stronger, not weaker.

Decriminalisation: A Civil Penalty Instead of Prosecution

A set of offences under the Companies Act and the LLP Act stop being crimes. Instead of prison or a fine, the company pays a monetary penalty. The list includes:

1. A producer company that will not give information about its affairs.
2. Breach of prescribed rules.
3. Failure to give the Registrar information it has asked for.
4. Poor maintenance of books of account.
5. Failure to comply with a Registrar's requisition, short of an actual summons.

Today any of these can, in theory, put a director in court. It does not matter how small or accidental the slip was. Under the Bill, the same slip costs money instead.

This matters more than it sounds. For a founder or a company secretary, the risk of a criminal record for a missed filing was always out of proportion to the harm. Taking it away makes running a company in India less frightening. That is what the ease of doing business agenda is for.

There is a catch. A civil penalty only works if someone enforces it. Set it too low, or apply it unevenly, and decriminalisation quietly turns into deregulation. That is not what the Bill says. It is what could happen.

India has been moving this way for a while. The Jan Vishwas (Amendment of Provisions) Bill process does the same thing in other statutes.

The New Small Company Threshold: How Section 2(85) Actually Works

Most reports get this wrong. It is worth going slowly.

Section 2(85) does not give one number. It works in two layers. The Act sets a base figure and a maximum. The government then fixes the real limit somewhere in between, through rules.

Three figures matter:

1. What the Act says. Paid-up capital up to Rs 50 lakh, and turnover up to Rs 2 crore. The government may raise these, but not above Rs 10 crore and Rs 100 crore.
2. What the rules actually set. Rs 4 crore of paid-up capital and Rs 40 crore of turnover. These have applied since 15 September 2022. This is what a company secretary works with.
3. What the Bill does. It lifts the maximum to Rs 20 crore and Rs 200 crore. It doubles the room the government has to play with.

So the Bill on its own makes no company eligible. It only creates space. The relief comes later, when the Ministry of Corporate Affairs issues new rules inside that space. How far the Ministry goes is a separate decision.

Put plainly: if you are planning around Rs 200 crore today, you are planning around a maximum, not an entitlement.

Assume the rules do follow. More growing businesses would then keep the lighter treatment small companies get. No mandatory cash-flow statement. Fewer board meetings. A simpler annual return.

There is a familiar risk. Thresholds become targets. Some companies will arrange their affairs to sit just under the line, instead of letting the business grow on its own terms.

The wider policy direction is clear. Over 7.83 crore enterprises were registered on the Udyam and Udyam Assist platforms as of 28 February 2026. That is an MSME number, not a company number. But it shows a government that keeps trying to make formal business cheaper.

CSR: Fewer Companies Will Have to Spend

A company must spend at least 2 per cent of average net profit on CSR if it crosses any one of three lines. Net worth of Rs 500 crore. Turnover of Rs 1,000 crore. Net profit of Rs 5 crore.

The Bill raises the profit line to Rs 10 crore, or such other sum as may be prescribed. It also lets companies that meet prescribed conditions be exempted from CSR altogether.

A band of mid-sized, profitable companies drops out of mandatory CSR. They save the paperwork and the cash.

Leaving the legal bracket is not the same as leaving social responsibility. A board that drops out should still ask whether some voluntary spending is good for the brand and for hiring. Doing what the law demands and doing what is right have never been the same thing.

Fast-Track Mergers Under Section 233: A Real Bottleneck Removed

This is the change with the most commercial bite.

Section 233 offers a fast-track route for two kinds of merger. Between two or more small companies. And between a holding company and a subsidiary it wholly owns.

Today that route needs approval from shareholders and creditors holding 90 per cent of shares or value. The Bill drops it to a majority of members present and voting, holding at least 75 per cent of the shares among those present. The creditor bar falls the same way.

Ninety per cent sounds easy on paper. It is not. One untraceable shareholder can hold up a scheme for months. Counting only those who turn up removes that problem.

The timing is good. LSEG data put India's M&A deal value at US$86.9 billion in the first half of 2026. That is up 31 per cent on the year before, even though the number of deals fell.

The cost is a thinner safety net for minority shareholders. A lower legal bar is not a reason to stop talking to the shareholders and creditors who disagree.

Buy-Backs, Valuation and Employee Share Plans

Three smaller changes give a company more control over its own capital.

1. Buy-backs. The cap today is 25 per cent of paid-up capital and free reserves. The Bill lets prescribed classes of companies go higher. Debt-free companies get more room to return cash. The board still has to be satisfied the money is genuinely spare.
2. Valuation. IBBI becomes the Valuation Authority. It will register valuers and set standards for mergers, buy-backs, ESOP pricing and insolvency alike. One regulator should mean fewer contradictory valuations.
3. Share plans. The Bill recognises Restricted Stock Units and Stock Appreciation Rights, not just ESOPs. Startups get firmer legal ground for retention plans.

NFRA Gets More Power, Not Less

Most of this Bill loosens things. This part does the opposite.

The National Financial Reporting Authority gets power to make its own rules on how it investigates. It can issue advisories, censures and warnings.

Put the two halves together and a pattern appears. Less criminal risk for small technical mistakes. More scrutiny where the issue is financial reporting and audit quality.

We have written separately on why NFRA's expanded powers reach further than auditors, and why a growing private company should expect its audit to get more expensive.

One more provision is worth a line. Trusts registered with SEBI or the IFSC Authority may convert into LLPs. That is narrow, but useful for the GIFT City funds ecosystem.

What Businesses Should Do Now

There is work worth doing before the Bill becomes law. There is also work worth not doing.

1. Find the clauses that touch you. Small company status, CSR, mergers, buy-backs or ESOPs. Most companies are affected by two or three clauses, not by the whole Bill.
2. Do not treat a maximum as a threshold. On small company status, wait for the rules, not the section.
3. Tidy up governance. Related-party transaction records and audit committee minutes are where NFRA looks first.
4. Watch the drafting on share plans. If you rely on ESOPs, RSUs or SARs, wait for the final definitions before you redesign a pool.
5. Diarise the rules, not just the Act. The parts that matter most to mid-sized companies will be settled months after assent.

Take advice before treating any commentary, this article included, as a substitute for the enacted text.

Star and Sterling Associates' Perspective

Take away the clause numbers and this Bill is a bet. It bets that Indian companies follow the law because it is good business, not because they fear prison.

We think that is broadly right. Criminal law was never a good tool for fixing a late filing.

But the bet only pays off if the civil penalty is enforced properly. A penalty nobody expects to pay is not a deterrent. It is a formality.

The quieter half of the story is the more interesting one. Raising the small company limits and easing mergers says something about how big "small" has become in India. Giving NFRA sharper tools says something else. Lighter regulation and weaker regulation are not the same thing.

Our concern for policymakers is simple. Too much of this Bill is left to rules that do not exist yet. Until those rules are notified, nobody can see the real shape of the reform.

Good regulation is not measured by how much red tape it removes. It is measured by whether what is left still protects the people the law is there to protect.