The Ministry
of Corporate Affairs (MCA), Government of India has constituted an independent
regulatory body named National Financial Reporting Authority (“NFRA”) and
notified the National Financial Reporting
Authority Rules, 2018 (“Rules”) vide Notification dated November 13, 2018,
effective from November 14, 2018. The National Financial Reporting Authority
(NFRA) is a body constituted under the provisions of Section 132 of the
Companies Act, 2013. The constitution of this authority is effective from 1st
October 2018.After various recent scams like PNB scam and other financial scams
and frauds in the country, NFRA is a very welcoming move by the present
government.
SCOPE OF THE NFRA
Classes of
companies and bodies corporate governed by NFRA: NFRA shall have power to monitor and enforce compliance with accounting
standards and auditing standards, oversee the quality of service or undertake
investigation of the auditors of the following class of companies and bodies
corporate, namely:
a. Companies whose securities are listed
on any stock exchange in India or outside India;
b. Unlisted public companies having
paid-up capital of not less than Rs 500 crores or having annual turnover of not
less than Rs 1,000 crores or having, in aggregate, outstanding loans,
debentures and deposits of not less than Rs 500 crores as on the 31st March of
immediately preceding financial year;
c. Insurance companies, banking companies,
companies engaged in the generation or supply of electricity, companies
governed by any special Act for the time being in force or bodies corporate
incorporated by an Act in accordance with section 1(4)(b) to (f) of the Act;
d. Anybody corporate or company or person,
or any class of bodies corporate or companies or persons, on a reference made
to the NFRA by the Central Government in public interest; and
e. a body corporate incorporated or
registered outside India, which is a subsidiary or associate company of any
company or body corporate incorporated or registered in India as referred to in
clauses (a) to (d), if the income or net worth of such subsidiary or associate
company exceeds 20% of the consolidated income or consolidated net worth of
such company or the body corporate, as the case may be, referred to in clauses
(a) to (d).
*A company or a body corporate other than a company governed under this
rule shall continue to be governed by the NFRA for a period of 3 years after it
ceases to be listed or its paid-up capital or turnover or aggregate of loans,
debentures and deposits falls below the limit stated therein. *
REPORTING
TO NFRA
- Every existing body corporate other
than a company governed by these rules, shall inform the NFRA within 30 days of
the commencement of these rules, in Form NFRA-1, the particulars of
the auditor as on the date of commencement of these rules;
- Everybody corporate, other than a
company as defined in section 2(20), formed in India and governed under this
rule shall, within 15 days of appointment of an auditor under section 139(1), inform
the NFRA in Form NFRA-1, the particulars of the auditor appointed
by such body corporate. However, a body corporate governed under sub-rule
(1)(e) shall provide details of appointment of its auditor in Form
NFRA-1.
ANNUAL RETURN
A return with the NFRA on or before 30th April every year shall be filed
with NFRA in such form as may be specified by the Central Government.
PUNISHMENT IN CASE OF
NON-COMPLIANCE:
lf a company or any officer of a company or an auditor or any other
person contravenes any of the provisions of these rules, the company and every
officer of the company who is in default or the auditor or such other person
shall be punishable as per the provisions of section 450 of the Act.
