Fractional shares for certain categories of companies and Producer Limited Liability Partnerships (LLPs) may soon become a reality, with the government proposing amendments to corporate laws in the upcoming Winter Session of Parliament.
According to the Lok Sabha Bulletin, the government has listed the Corporate Laws (Amendment) Bill, 2025 for introduction, consideration and passage during the session scheduled to begin on December 1. The Bill aims to amend the Companies Act, 2013 and the LLP Act, 2008 to facilitate ease of doing business and address gaps identified by the Company Law Committee in its 2022 report.
The Committee recommended 26 changes to the Companies Act and one to the LLP Act. A major proposal is the legal recognition of issuance and holding of fractional shares, portions of a share that are less than one full unit, often arising from corporate actions like mergers, bonus issuances or rights issues. Current law does not permit investors to hold fractional shares. The panel observed that high share prices deter retail investors with limited purchasing power, and enabling fractional shareholding would allow them to invest precise, budgeted amounts in otherwise expensive stocks.
At present, fractional share trading is permitted only within the International Financial Services Centres Authority’s regulatory sandbox. Countries such as the U.S., Canada and Japan already allow holding and trading of fractional shares. The Committee has therefore proposed adding a provision enabling issuance, holding and transfer of fractional shares for specified classes of companies.
Legal recognition
The panel observed that high share prices deter retail investors with limited purchasing power, and enabling fractional shareholding would allow them to invest precise, budgeted amounts in otherwise expensive stocks.
At present, fractional share trading is permitted only within the International Financial Services Centres Authority’s regulatory sandbox. Countries such as the US, Canada and Japan already allow holding and trading of fractional shares.
An tax expert says, “I am myself an investor in US markets for a very long time and fractional shares investments have really made a difference to my investment strategy. For example, the price of one share of Berkshire Hathaway — Warren Buffet — is $7,55,320 but you can buy a fraction share of even $100 or $1,000 or $1,00,000 etc, and you can still become a fractional shareholder of the company.”
Similarly in India, there are companies like MRF Ltd and the price of one share is ₹1,52,210. Now if the law permits fractional shares in India, then one can buy a small fraction or portion of MRF Ltd by investing ₹100 or ₹1,000 or ₹10,000 or ₹1,00,000 etc, according to his or her investing appetite or capacity for that particular shares.
One important recommendation is about holding general meeting by the company.
Owing to the multifarious benefits of relaxing the requirement for physical meetings, the committee recommended amending suitable provisions in the law to enable the Central Government to prescribe the manner in which companies can hold AGMs and EGMs physically, virtually and in hybrid mode.
Electronic mode
It was also stated that where the meeting is for an EGM to be conducted entirely in electronic mode, the notice period for such meetings could be reduced to such period as may be prescribed by Central Government.
Another key recommendation is about self-declaration. Here the panel recommended that the requirement of furnishing an affidavit should be replaced with filing a declaration under the provisions of CA-13 and Rules made thereunder, except in those provisions that involve filing an affidavit in a judicial or quasi-judicial proceeding before the NCLT or the NCLAT.
Another recommendation relates to distressed companies. The Committee has suggested allowing such entities to issue shares at a discount to the Centre, states or designated investors. Distressed companies would be defined as those reporting cash losses (excluding depreciation or revaluation losses) for three or more consecutive years.
Producer LLP structure proposed
The amendment linked to the LLP Act proposes a new chapter introducing the concept of Producer LLPs. The Committee noted that producer organisations support collective decision-making, reduce transaction costs and improve the viability of small agricultural operations.
While the Companies Act already provides for Producer Companies, the Committee believes Producer LLPs would offer a more suitable structure for small producers due to simpler compliance requirements. LLPs, for instance, do not require mandatory audits unless turnover exceeds ₹40 lakh or capital contribution crosses ₹25 lakh. The panel said the LLP framework offers easier formation, flexible management and tax efficiency, advantages that could help boost producer incomes.
