23/03/2026
🔎 A Quiet but Powerful Change Proposed in the Companies Act – Section 139 (Auditor Appointment)
The Corporate Laws (Amendment) Bill, 2026 has proposed an interesting insertion in Section 139 of the Companies Act, 2013.
A new sub-section provides that certain classes of companies may not be required to appoint auditors, subject to conditions that will be prescribed by the Central Government.
At first glance, this looks like a small amendment. But from a corporate governance and compliance perspective, it is actually a significant policy shift.
💡 **Why this amendment matters**
For the first time, the law is creating a possibility where **audit may not be mandatory for every company**. Until now, Section 139 required *every company* to appoint a statutory auditor, regardless of size or activity.
This amendment indicates a clear move towards **risk-based compliance rather than blanket compliance**.
📌 **What could this mean in practice?**
Although the Bill does not specify the classes of companies, it empowers the Government to prescribe them through rules. Practically, the exemption may be aimed at:
• Dormant companies with no significant transactions
• Very small or inactive private companies
• Certain entities already regulated by other authorities
The idea is simple: **where there is minimal financial activity, mandatory audit may not always add proportional regulatory value.**
⚖️ **Balancing Ease of Doing Business & Governance**
While this amendment could reduce compliance costs for genuinely inactive companies, it also raises important questions:
• How will the exempted classes be defined?
• What safeguards will prevent misuse?
• Will alternate reporting mechanisms be introduced?
The real impact will depend entirely on **how MCA frames the rules under this enabling provision**.
📊 **My Take**
This amendment reflects a broader trend in corporate regulation:
➡ moving from **one-size-fits-all compliance**
➡ towards **proportionate regulation based on risk and size**
If implemented carefully, it could **reduce unnecessary compliance for dormant entities while preserving strong governance for active companies.**
But the key will lie in **rule-making and safeguards**.
Union Minister for Finance and Corporate Affairs Nirmala Sitharaman has introduced the Corporate Laws (Amendment) Bill, 2026 in the Lok Sabha today. The Bill seeks to amend the Limited Liability Partnership Act, 2008 and the Companies Act, 2013. The second phase of Budget session will go upto April 2.
👨⚖️ **For professionals**, this is a provision worth watching closely — the notification of rules under this section could reshape the audit landscape for smaller companies.
Atul Krishan & Company - Tax Consultant
