The government has proposed to increase the minimum net profit threshold for mandatory corporate social responsibility (CSR) spending by companies to Rs 10 crore. This move aims to ease the burden on companies with nominal profits, allowing them to focus on growth rather than CSR contributions.
In addition, the Corporate Laws (Amendment) Bill, 2026 tabled in Parliament on Monday, proposes to give companies more time to transfer funds to the unspent CSR account for long-term projects.
Currently, under Section 135 of the Companies Act, companies with a turnover above Rs 1,000 crore, a net worth above Rs 500 crore, or a net profit exceeding Rs 5 crore must spend at least 2% of their average net profits from the previous three years on CSR.
“The goal is to drive impactful CSR spending”
“The goal is to drive impactful CSR spending, not overburden companies with governance and spending,” said Anjali Malhotra, partner (regulatory) at Nangia Global.
The Bill, which seeks to make significant changes to the Companies Act, 2013 and the LLP Act, 2008, also proposes to relax the buy-back norms. This relaxation allows a prescribed class of companies to make up to two buy-back offers within one year, provided the second offer (in the same year) is not made within six months of the conclusion of the first offer.
Further it is proposed that companies which are debt-free can be considered to undertake more than one buy-back in a financial year. Currently, companies in India are generally allowed to undertake only one buy-back offer in a single financial year.
The Bill, which has been referred to the joint parliamentary committee (JPC) for further scrutiny, also seeks to introduce enabling provisions to recognise non-monetary employee benefit schemes like restricted stock units (RSUs) and stock appreciation rights (SARs) – in addition to the employee stock option plan (ESOP) schemes.
While the Sebi regulations recognise SARs but they can only be issed to the employees after shareholders approve a special resolution at the general meeting, regulations pertaining to RSUs are currently non-existent.
“By implicitly recognising instruments such as RSUs and SARs, in addition to ESOP scheme linked to the value of share capital, the law provides a more nuanced regulatory approach that allows proportional compliance and facilitate corporate actions in a more calibrated manner,” said Amit Maheshwari, managing partner at AKM Global.
Further, the Bill proposes to empower audit regulatory body National Financial Regulatory Authority (NFRA) to make regulations. Currently, NFRA cannot independently create new laws. In addition, the Bill gives powers to the central government to issue directions to, and supersede NFRA.
At the time of presenting the Bill, finance minister Nirmala Sitharaman said the proposed powers given to NFRA are similar to those which have been given to other regulators like Securities and Exchange Board of India (SEBI), Competition Commission of India (CCI) and Insolvency and Bankruptcy Board of India (IBBI). “The powers to make regulations by NFRA is subject to prior consultation with stakeholders. Each regulation, after it is made, is to be laid down before both the houses for a period of 30 days and modifications, if any, will be included in the revised regulations,” she said.
Further, the Bill has proposed decriminalisation of various procedural defaults under the Companies Act and the LLP Act by replacing criminal provisions with civil penalties. Some 21 offenses have been decriminalised which would be handled through adjudication mechanism. The penalty process have also been made transparent through e-adjudication platform.
The Bill attempts to align India’s corporate regulatory framework with global standards, particularly in the context of International Financial Services Centres (IFSCs). For instance the companies and LLPs operating in IFSCs will be allowed to issue and maintain share capital in foreign currency as permitted by the International Financial Services Centres Authority (IFSCA).
Crucially, the amendment Bill tweaks the definition of small companies by raising the upper limit of paid-up share capital to Rs 20 crore (from Rs 10 crore) and turnover to Rs 200 crore (from Rs 100 crore). Additionally, small companies will stand to benefit from certain relaxation proposed in the Bill, including exemption from mandatory CSR, and requirements related to auditor appointment.
The proposed law has given a push toward digitalisation through recognition of electronic modes of communication, hybrid meetings, and online disclosures – a move that demonstrates regulatory alignment with contemporary business practices. “The Bill enables companies to hold annual general meetings (AGMs) and extraordinary general meetings (EGMs) through video conferencing or other audio visual means with requirement for holding at least one AGM in physical mode within a specified period,” it said.
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