Statutory auditor requirement relaxed for smaller companies in new Bill
New Delhi, Mar 25, 2026
The proposed amendments relax compliance for small companies while strengthening accountability for executives and directors, raising concerns over governance and oversight
The Corporate Laws Amendment Bill removes the statutory auditor requirement for certain small companies — a move intended to improve ease of doing business, but one that experts argue may dilute financial discipline and third-party oversight.
The class of companies to get the exemption will be notified later.
“It is a welcome move, but the government should be mindful that a lot of such small companies are being set up as intermediaries for just the routing of funds or entries. So a balanced approach needs to be adopted,” said Ankit Singhi, head of corporate affairs and compliance, Corporate Professionals.
The Bill’s proposal is expected to be discussed at the next council meeting of the Institute of Chartered Accountants of India, sources said, as CAs will be affected if numerous small companies are exempted from the audit requirement.
The Bill also proposes that whole-time key managerial personnel (KMP) who are not directors — such as chief executive officers or chief financial officers — file their resignation with the Registrar of Companies in cases where the company fails to do so.
“These proposed amendments reflect a clear regulatory shift towards tightening individual accountability while simultaneously easing compliance for smaller entities, but they also expose certain structural tensions within company law,” said Sonam Chandwani, managing partner, KS Legal & Associates.
Chandwani said allowing non-director KMPs to independently file their resignation is a corrective step against management suppression and reduces the risk of continued “deemed liability” post-exit. However, it could also trigger governance instability if used tactically in distress situations, she said.
The Bill also proposes that a person must hold a valid Director Identification Number (DIN) at the time of appointment and throughout their tenure. Without a valid DIN, the office of such director shall be vacated — a change that introduces a new ground for disqualification.
Company law experts said that the “valid DIN at all times” requirement strengthens transparency and prevents misuse of dormant or deactivated identities, but may be a harsh practice when DIN deactivation is triggered by technical non-compliance (such as KYC lapses). It could lead to automatic vacation of office without adjudicatory oversight, thereby raising concerns of proportionality and due process.
The Bill, which was referred to a joint parliamentary committee after being tabled in Lok Sabha on Monday, proposes to decriminalise various procedural defaults, strengthen the National Financial Reporting Authority, have stricter provisions for non-audit services, and provide flexibility in buyback of shares. It covers changes in the Companies Act, 2013, and the Limited Liability Partnership Act, 2008.
The amendments have been proposed based on the Company Law Committee’s report, consultations with stakeholders, and the recommendations of the High Level Committee on Non-Financial Regulatory Reforms.
[The Business Standard]
