Corporate Laws Amendment Bill 2026 Proposes Ending Trust Notice Recording in Company Registers

The Corporate Laws (Amendment) Bill, 2026 would stop companies from recording trust notices in their statutory ownership records, shifting corporate recognition back to the registered holder of shares or debentures.

The proposed Section 88(2A) would cover express, implied and constructive trusts. It would apply to the register of members and the register of debenture holders, but would not invalidate the trusts themselves.

The bill reached the Lok Sabha on March 23, 2026, after Finance and Corporate Affairs Minister Nirmala Sitharaman introduced it. Parliament then sent it to a 31-member Joint Parliamentary Committee for review.

The proposal remains pending. It has not taken effect.

The committee, chaired by Sudheer Gupta, presented its final report to Parliament on August 3, 2026. Its report broadly endorsed the bill while recommending changes to other corporate governance and enforcement provisions.

Sitharaman said the measure would “further the ease of doing business by reducing procedural friction and modernizing corporate processes.”

The proposed wording is direct:

“No notice of any trust, whether express, implied, or constructive, shall be entered in the register of members or debenture holders.”

Companies would recognize the registered holder, not the private trust arrangement

The proposed restriction would prevent a company from entering a notice of trust in either statutory register. The company would instead deal with the person recorded as the legal holder.

That distinction does not erase the arrangement between trustees, beneficiaries and other parties. Trust and beneficial ownership details would remain matters between those parties, subject to separate disclosure rules.

The bill’s approach follows the position under the Companies Act, 1956, which expressly barred companies from recording trusts. The Companies Act, 2013, omitted that specific prohibition, creating administrative ambiguity.

The Company Law Committee recommended restoring the restriction in 2022. Its reasoning centered on keeping companies out of disputes between trustees and beneficiaries.

Under the proposed structure, the trustee would remain registered as the member. The trust would be disclosed separately as the beneficial owner under Section 89.

The committee said the bill “seeks to simplify statutory register maintenance and clarify that only registered holders. will be recognized for corporate purposes.”

Trustees and company secretaries would face the clearest operational change

Individuals holding shares for family trusts or nominees would be the recognized parties for voting and dividends. They would no longer be able to ask a company to note the underlying trust arrangement in its formal member register.

The change would also affect company secretaries, who maintain corporate records. If Parliament enacts the provision and the government notifies it, company secretaries would need to ensure statutory registers no longer carry existing trust notices.

The proposal targets recordkeeping, not the validity of a trust. That leaves the underlying fiduciary relationship in place while limiting what appears in the company’s formal ownership records.

A separate measure would allow specified trusts, including alternative investment funds, to convert into limited liability partnerships. The research describes that change as offering investment vehicles a more flexible tax and governance structure.

The committee report also backs wider compliance changes

The trust-entry rule forms one part of a broader bill that would revise thresholds, penalties and enforcement powers.

The committee also recommended giving the National Financial Reporting Authority power to file complaints against “any person.” That would expand the authority’s oversight beyond auditors.

Industry bodies welcomed the committee’s “two-track enforcement” approach on August 4, 2026. The Institute of Company Secretaries of India and the Confederation of Indian Industry described the approach as reducing criminal treatment for procedural defaults, such as late filings, while tightening penalties for substantive fraud.

The bill therefore combines register changes with wider efforts to reduce penalties for some procedural failures and increase consequences for certain corporate misconduct.

The proposal still needs Parliament and government action

The Joint Parliamentary Committee report was tabled in both the Lok Sabha and Rajya Sabha on August 3, 2026. The bill is expected to be considered during the final days of Parliament’s Monsoon Session or during the upcoming Winter Session.

Passage alone would not bring the trust-entry rule into force. The bill would still require Presidential assent and a notification from the Ministry of Corporate Affairs.

Until those steps occur, companies continue operating under the existing statutory framework. The proposed restriction has no effective date yet.

The final result could also depend on the bill’s movement through the remaining legislative stages. The committee broadly supported the measure but recommended modifications to related corporate governance provisions.

For companies maintaining ownership records, the practical question is whether the bill ultimately preserves its proposed wording. That text would bar notices of express, implied or constructive trusts while leaving beneficial ownership disclosure under Section 89 as the separate route.

The legislative process remains active after the committee’s August 3 report. Presidential assent and a Ministry of Corporate Affairs notification would be required before the new register rule could operate.