The Decriminalisation Architecture
The Corporate Laws (Amendment) Bill, 2026, introduced in the Lok Sabha on March 23, 2026, decriminalises several offences under the Companies Act and the LLP Act. The stated policy is to replace imprisonment or criminal fine with civil penalty for defined procedural defaults, including contravention of rules, failure to furnish information to the Registrar, and violations relating to books of account. The Joint Parliamentary Committee, which reported on August 3, 2026, endorsed the broader decriminalisation exercise and recommended replacing criminal sanctions with civil penalties to promote voluntary compliance.
What Decriminalisation Does Not Change
The Bill does not repeal Section 188 or the approval requirements for related-party transactions. It changes the consequence of a defined set of procedural defaults from criminal to civil. The voidability of a non-compliant RPT, the personal penalty on a director for Section 184 non-disclosure, and the audit committee’s oversight role remain intact. Advisors who read the Bill as a relaxation of RPT governance are misreading its scope.
The CSR Threshold Change
The Bill raises the net-profit threshold for CSR applicability from ₹5 crore to ₹10 crore, and empowers the government to exempt prescribed classes of companies from CSR compliance. The two per cent spending obligation and the Section 135(7) penalty architecture for unspent amounts remain, but the population of companies subject to the obligation shrinks. Companies near the threshold should model the change against their three-year average net profit before revising their CSR budgets.
NFRA and Audit Reform
The Bill strengthens NFRA and introduces mandatory audit safeguards, including measures aimed at auditor independence. For RPT-intensive groups, the practical implication is heightened scrutiny of the auditor’s RPT testing and the audit committee’s documentation. The Bill also exempts prescribed classes of companies from the requirement to appoint an auditor, which will require a careful reading of the notified rules before any exemption is claimed.
The Compliance Posture for 2026-27
The decriminalisation should not be treated as a reason to defer RPT documentation. The civil penalty regime is likely to be administered through the ROC’s adjudication machinery, which is faster and more data-driven than criminal prosecution. A company with a clean RPT file is better positioned to resolve a civil penalty notice than a company whose file is incomplete. The Bill’s reform trajectory favours proportionate compliance, not absent compliance.
Call to Action: For a 2026 Bill impact assessment on your RPT and CSR compliance architecture, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.