The Corporate Laws (Amendment) Bill, 2026: No Audit for Some Companies, a Cooling-Off for Auditors, and What the Committee Changed

Every CA who audits small companies has had some version of this conversation. A client with a modest turnover, two directors who are also the only shareholders, and a question put gently at the end of the meeting: does a company like ours really need an audit?

For as long as the Companies Act, 2013 has been in force, the answer has been yes. The Corporate Laws (Amendment) Bill, 2026 would let the Government change it. It would also change what an auditor may do for a client after the audit ends, and who may sit on a client's board. A Joint Committee of Parliament has already rewritten parts of all three.

Where the Bill stands

The Bill was introduced in the Lok Sabha on 23 March 2026 as Bill No. 85 of 2026. It amends two Acts, the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. It was referred to a Joint Committee the same day, and the Rajya Sabha concurred on 24 March. The Committee's report was presented on 3 August 2026, with a revised text of the Bill.

As at 19 September 2026, PRS Legislative Research's tracker shows no passage by either House. What follows is therefore two drafts and a recommendation, not law. The Committee's changes bind nobody until the Government adopts them and Parliament passes the Bill.

Companies that would need no auditor

Clause 44 inserts a new section 139(12). As introduced, it reads: "Such class or classes of companies which fulfil such conditions as may be prescribed shall not be required to appoint auditors under this Chapter." The Notes on Clauses give the purpose in one line: "facilitating ease of compliance for small companies".

Three things about it are easy to miss.

• The Act names no company. Which classes, and on what conditions, are left entirely to the Rules. In its written replies to the Committee, the Ministry said the relaxation is intended for small companies, and that it does not dispense with preparing and filing financial statements or annual returns.
• The Committee narrowed it to private companies. Its version reads "such class or classes of private companies", and adds that wherever the Act or the Rules need audited financial statements to work out a figure, they are to be read "as if there is no requirement for audit".
• "Small" is growing too. Clause 18 raises the ceilings in the definition of a small company in section 2(85) to ₹20 crore of paid-up capital and ₹200 crore of turnover. The Committee accepted that without change. The limits actually applied are prescribed within those ceilings.

What an auditor may do for the client, and for how long after

Section 144 today bars an auditor from a listed set of services: bookkeeping, internal audit, design of financial information systems, actuarial and investment advisory services, investment banking, outsourced financial services and management services, among others.

Clause 46 goes much further. As introduced, for prescribed classes of companies, an auditor "shall not provide, directly or indirectly, any non-audit services" to the company, its holding company or its subsidiary. A second proviso then carries the restriction on for three years after the auditor's term under section 139(2) has ended.

The Committee pulled both back. It recommended that the ban apply only to non-audit services "as may be prescribed", that "management services" become "management functions", and that the Ministry use its rule-making power to confine the stricter prohibitions to public interest entities and other high-risk companies. On the cooling-off period, it noted the concerns about group companies, joint audits and mid-term resignations, and recommended that the three years "be reduced to one year". Its revised clause reads one year.

The rest of the audit chapter

• Partners of an audit firm. Clause 45 would have required every partner of an audit firm to be registered with a statutory body established under Indian law. The Ministry agreed to drop it, and the Committee recommended that it be omitted.
• Auditors on the board. Clause 54 makes a person who was the company's auditor, secretarial auditor, cost auditor, registered valuer or insolvency professional in the preceding three financial years, or in the current one, ineligible to be its director. The Committee recommended two years.
• NFRA. Clauses 40 and 41 make NFRA a body corporate with new powers: advisories, censure, warnings, further training, returns from auditors, directions, and up to six months' imprisonment for not complying with its orders. The Committee recommended removing the imprisonment, reducing the penalties, and requiring an inquiry before a direction is issued.
• Penalties that stop being offences. Clause 47 sets fixed penalties for companies and officers that breach the provisions on appointing auditors, filling casual vacancies, auditors' remuneration and auditors attending general meetings: for a company, ₹1 lakh plus ₹500 a day, up to ₹5 lakh. It is part of the Bill's wider decriminalisation.

What to do now

Nothing changes in an engagement letter today. But three things are worth doing while the Bill waits.

• Map the book. List the clients that are small private companies, and the non-audit work you do for audit clients and their group companies. Those are the two lists this Bill touches.
• Watch the Rules, not only the Act. Under both the Bill and the Committee's version, the classes of companies and the services that count are left to be prescribed. The Act will say what is possible, and the Rules will say who is affected.
• Read the final text, not the headline. The difference between three years and one, or between "any" non-audit services and those "as may be prescribed", is the whole story here, and it sits in a single line of a proviso.

Where this comes from

The Bill is quoted from its text as introduced in the Lok Sabha (Bill No. 85 of 2026), including its Statement of Objects and Reasons and Notes on Clauses. The Committee's positions are from the Report of the Joint Committee presented on 3 August 2026 and the Bill as reported with it. The status is from PRS Legislative Research's bill tracker on 19 September 2026, and the present law from the Companies Act, 2013. Check the Bill's status before relying on any of it.