Rethinking Independent Director Due Diligence: Key Takeaways from the Corporate Laws (Amendment) Bill 2026

The Corporate Laws (Amendment) Bill, 2026, proposes targeted changes to Section 149 of the Companies Act, 2013, that could make independent director (ID) appointments more demanding for companies. The proposed amendments expand the period covered by independence checks, introduce a continuing compliance obligation, widen cooling-off restrictions, and clarify how professional relationships and prior service as an additional director affect eligibility and tenure.

For businesses, the key change is that independent director diligence would no longer be limited to assessing eligibility at the time of appointment. Companies would need to pay closer attention to changes in an independent director’s employment, professional relationships, group-company associations, and tenure throughout the appointment period.

Expand due diligence beyond the previous three financial years

The Bill proposes to extend certain independence tests under Section 149(6)(e) of the Companies Act 2013 to cover the current financial year, in addition to the three financial years immediately preceding the financial year of appointment. This applies to the relevant employment and professional-relationship restrictions.

Businesses should therefore review candidate histories for the current financial year as well as the preceding three financial years before making an appointment.

This is particularly relevant where a potential independent director has recently worked for, or had a professional association with, the company, its holding company, subsidiary, or associate company. A candidate who satisfies the historical three-year test may still require further scrutiny if a relevant relationship exists during the current financial year.

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Review independent director professional relationships with greater care

Clause 49 of the Corporate Laws (Amendment) Bill 2026 proposes changes to the professional relationship tests used to determine whether a person qualifies as an independent director.

First, the Bill replaces the reference to “company secretaries in practice” with “secretarial auditors” in Section 149(6)(e)(ii)(A). This updates the terminology used in the independence criteria.

Second, the Bill proposes to modify the threshold applicable to certain legal and consulting firms. Under the proposed amendment, the relevant transactions must amount to 10 per cent or such lower percentage as may be prescribed. In other words, 10 per cent remains the threshold stated in the Bill, but the government may prescribe a lower threshold through rules.

Treat independence as an ongoing requirement

Companies would require every independent director to ensure that they continue to fulfil the requirements of Section 149(6) throughout their term of appointment.

This changes the compliance focus from a largely appointment-stage assessment to an ongoing obligation.

Businesses should consider strengthening their existing independent director compliance processes accordingly. This could include:

• Obtaining updated independence declarations from independent directors
• Reviewing changes in employment and professional affiliations
• Monitoring relevant transactions involving legal and consulting firms
• Checking relationships with the company and its holding, subsidiary, and associate companies
• Maintaining appropriate documentation to demonstrate that independence requirements were reviewed during the tenure

The Bill does not prescribe a specific annual or quarterly review mechanism.

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Assess the entire corporate group during the cooling-off period

The Bill proposes to extend the existing three-year cooling-off restriction so that an outgoing independent director cannot be appointed or associated in another capacity not only with the company but also with its holding, subsidiary, or associate company during the cooling-off period.

This has direct implications for group-level succession planning.

Recalculate tenure where an independent director first served as an additional director

The Bill proposes to clarify that any period during which an independent director served as an additional director of the company will be included in their tenure as an independent director for the purposes of the tenure provisions under Section 149(10) and (11).

Companies should therefore review the complete appointment history of potential independent directors rather than calculating tenure only from the date of their formal appointment as an independent director.

This will be particularly important when companies assess whether a candidate remains eligible for another term.

Strengthen group-wide appointment checks

Taken together, the amendments would make independent director due diligence more closely connected to the company’s wider corporate structure.

Before appointing an independent director, companies should consider reviewing the following criteria:

Criteria	What businesses should check
Employment history	Employment or KMP positions during the preceding three financial years and current financial year
Group relationships	Connections with the company, holding company, subsidiaries, and associates
Professional affiliations	Employment, partnership, or proprietorship in relevant audit, secretarial audit, legal, or consulting firms
Firm transactions	Transactions between relevant professional firms and the company or its group
Ongoing independence	Whether Section 149(6) requirements continue to be satisfied during the ID’s tenure
Previous appointments	Any period served as an additional director
Post-tenure roles	Proposed employment or other association with the company or group during the three-year cooling-off period

Do not rely solely on appointment-stage declaration

A candidate’s eligibility on the date of appointment may not be sufficient under the proposed framework. The new Section 149(6A) would place an express continuing obligation on the independent director to remain compliant with Section 149(6).

Companies should therefore consider whether their existing independent director declarations and board processes adequately capture changes arising during the tenure.

For example, a change in a director’s professional association or a material change in the relationship between a professional firm and the company could require reassessment. Businesses should establish clear internal escalation procedures so that potentially relevant changes are identified and assessed promptly.

What companies should prepare for now

The Corporate Laws (Amendment) Bill, 2026, has not yet converted these proposals into operative amendments. Companies can nevertheless begin reviewing their independent director appointment processes by doing the following:

1. Refresh candidate due diligence to cover the current financial year in addition to the existing three-year lookback
2. Map professional affiliations of proposed and serving independent directors.
3. Review transactions with legal and consulting firms associated with potential independent directors.
4. Expand group-company checks to holding, subsidiary, and associate companies.
5. Review independent director’s tenure records, including periods served as an additional director.
6. Strengthening ongoing independence declarations and monitoring, while recognising that the Bill does not prescribe a specific review frequency.
7. Track the rules that may follow the Bill, particularly the possibility of a lower threshold for legal and consulting-firm transactions.