The government may be preparing to soften a controversial proposal in the Corporate Laws (Amendment) Bill, 2026 that would allow certain top executives to resign almost overnight — after Corporate India reacted with the kind of alarm usually reserved for an unexpected auditor resignation.
At the centre of the debate is a proposed new Section 203(A), which gives whole-time key managerial personnel (KMPs) who are not directors, including chief financial officers, company secretaries and managers, the right to quit simply by submitting a written notice to the company. Once the notice is delivered, the resignation would take effect immediately or from a date specified by the executive, whichever is later.
India Inc flags ‘drop-and-exit’ risk for top executives
In effect, companies fear the provision could create a corporate version of “mic drop and exit” for senior executives.
The proposal has sparked sharp resistance from India Inc, with companies arguing that while junior employees may disappear after sending a late-night resignation mail, CFOs and company secretaries cannot exactly leave the office by dropping their access cards at reception.
“Due to the concerns raised by some sections of Corporate India, the government is ready to re-examine the provision,” a senior official said. “A parliamentary committee is currently reviewing the Bill and seeking stakeholder feedback. We will closely monitor the industry response.”
The official said the intention behind the proposal was not to empower abrupt exits but to bring greater transparency to the appointment and resignation of senior management personnel — especially in situations where companies refuse to formally acknowledge resignations.
Under the proposed framework, the board would have to accept the resignation and immediately notify the Registrar of Companies (RoC). If the company fails to do so within the prescribed timeline, the executive could independently send the resignation, along with detailed reasons, to the RoC.
The government believes such a fallback mechanism is necessary in cases involving governance disputes or situations where executives fear being indefinitely tied to a company despite wanting to leave. Importantly, the draft law clarifies that liability for defaults during the executive’s tenure would survive resignation. Still, legal and governance experts say the proposal risks creating serious operational complications.
“Given the fact that we are talking about a senior position, a resignation without applicable notice period seems unacceptable,” said Vinod Kothari, managing partner at Vinod Kothari & Company. “At that level, there is handover, takeover and transition involved. The departure of a key managerial person has significant governance implications.”
Another corporate law expert said the proposal appears to solve a problem that few in industry can clearly identify. “It is difficult to understand who exactly benefits from this provision. It clearly does not serve the interests of companies,” the expert said.
Indeed, promoters and boards worry that abrupt exits at the senior-most levels could leave companies scrambling during sensitive periods such as fundraising, regulatory scrutiny or quarterly results — precisely the moments when the CFO suddenly becoming “unreachable” is least desirable.
Firms seek safeguards for notice period obligations
The proposal also risks colliding with existing employment contracts, many of which mandate notice periods and structured transition obligations for senior executives. Legal experts expect the government to eventually insert safeguards ensuring contractual commitments remain enforceable.
“It is likely that KMPs will continue to remain subject to contractual terms agreed with the company and may be required to compensate for breach of those terms,” said Satwinder Singh, founder and managing partner of Aekom Legal.
Some experts believe the proposal may have drawn inspiration from a February ruling by the Kerala High Court in the Greevas Job Panakkal vs Traco Cable Co. case, where the court held that refusal to accept an employee’s resignation could amount to bonded labour under Article 23 of the Constitution.
The Corporate Laws (Amendment) Bill, 2026, introduced in Parliament earlier this year, is currently under review by a 31-member joint parliamentary committee that is expected to seek industry feedback before submitting its recommendations.
For now, the government appears to be keeping the exit door slightly ajar — though perhaps not quite as wide open as the original draft seemed to suggest.