Framing Lens

If you run a company, this bill changes several compliance rules. If your company net profit is between ₹5 crore and ₹10 crore, you would no longer be required to spend 2% of it on CSR. If your company has paid-up share capital up to ₹20 crore and turnover up to ₹200 crore, it would qualify as a small company with lighter compliance requirements. If you are an employee receiving equity-linked compensation, Restricted Stock Units and Stock Appreciation Rights now have a formal legal basis.

What Could Change
  • Directors could face civil penalties rather than criminal prosecution for certain procedural failures.
  • More companies would qualify as small companies under the revised thresholds.
  • Shareholders in eligible mergers would need to meet a 75% rather than 90% approval threshold.
  • Annual general meetings could be held remotely, with a physical meeting required at least once every three years.

What It Does

The Bill makes targeted amendments to two Acts. Under the Companies Act: it replaces criminal penalties for five categories of procedural non-compliance with civil penalties; raises the CSR net profit trigger from ₹5 crore to ₹10 crore; permits AGMs to be held by video conferencing except that a physical meeting must occur at least once every three years; raises the paid-up share capital ceiling for small companies from ₹10 crore to ₹20 crore and the turnover ceiling from ₹100 crore to ₹200 crore; reduces the shareholder approval threshold for mergers from 90% to a majority holding at least 75% of shares present and voting; reduces the creditor approval threshold from 90% to 75%; designates IBBI as the Valuation Authority; expands NFRA powers; and recognises RSUs and Stock Appreciation Rights. Under the LLP Act: permits specified trusts registered with SEBI or IFSC Authority to convert into LLPs.

Key Provisions

Decriminalisation of Procedural Offences
Replaces imprisonment or fine with civil penalties for five categories of non-compliance including failure to furnish producer company information, Rules contraventions, and violations of books of account requirements.
CSR Threshold Increase
Raises the net profit threshold triggering mandatory CSR spend from ₹5 crore to ₹10 crore. Companies above the threshold must contribute at least 2% of average net profit over the last three years.
Small Company Ceiling Expansion
Raises the upper limit on paid-up share capital for small company classification from ₹10 crore to ₹20 crore, and the turnover upper limit from ₹100 crore to ₹200 crore.
Merger Approval Threshold Reduction
Reduces shareholder approval requirement from 90% to a majority of members present and voting who hold at least 75% of shares. Reduces creditor approval threshold from 90% to 75%.
IBBI as Valuation Authority
Designates the Insolvency and Bankruptcy Board of India as the statutory Valuation Authority, responsible for registering valuers and recommending valuation standards.
AGM Flexibility
Permits annual general meetings via video conferencing, with a physical meeting required at least once every three years.
Extended Employee Compensation Schemes
Formally recognises Restricted Stock Units and Stock Appreciation Rights alongside existing employee stock options.

Supporters Say

Replacing criminal penalties with civil ones for procedural failures removes a disproportionate deterrent that discourages directors — particularly in smaller companies — from operating transparently. The revised thresholds reflect the actual scale at which most growing businesses operate and reduce compliance costs that have no proportionate regulatory justification.

Primary Sources

PRS Bill Summary Bill Text (PDF)

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