NATIONAL FINANCIAL REPORTING
AUTHORITY RULES, 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. The Central Government has notified National
Financial Reporting Authority Rules, 2018 vide MCA Notification dated 13.11.2018
effective from 14.11.2018.
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Terms of Reference of NFRA:
NFRA Shall:
- Recommend on the formulation and laying down of accounting and auditing policies and standards for adoption by companies or class of companies or their auditors.
- Monitor and enforce the compliance with accounting standards and auditing standards.
- Oversee the quality of service of the professionals associated with ensuring compliance with such standards, and suggest measures required for improvement in quality of service and such other related matters.
The National
Financial Reporting Authority shall—
- Power to investigate, either suo moto or on a reference made to it by the Central Government.
- Powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters, namely:—
(i) Discovery
and production of books of account and other documents, at such place and at
such time as may be specified by the National Financial Reporting Authority;
(ii) Summoning and enforcing the attendance of persons and examining them on oath;
(ii) Summoning and enforcing the attendance of persons and examining them on oath;
(iii) Inspection
of any books, registers and other documents of any person referred to in clause
(b) at any place;
(iv) Issuing
commissions for examination of witnesses or documents;
In case of Professional misconduct, imposing penalty or debarring the member or the firm or itself from practice as member of the Institute of Chartered Accountant of India for a minimum period of six months or for such higher period not exceeding ten years.
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Classes of Companies governed by the Authority:
The
following classes of Company shall be governed by the NFRA Rules:
(a)
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Listed Companies
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Listed on
any Stock Exchange in India or outside India
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(b)
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Unlisted Public Company
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· Paid Up Share Capital of not
less than Rs. 500.00 Crores, or
· Annual Turnover of not less
than of Rs. 1000.00 Crores or
· In aggregate, outstanding
loans, debentures and deposits of not less than Rs. 500.00 Crores
as on the 31st March of immediately preceding
financial Year
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(c)
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Insurance Companies
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(d)
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Banking Companies
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(e)
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Companies engaged in the
generation or supply of electricity
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(f)
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Companies governed by any
special Act for the time being in force
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(g)
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Bodies Corporate incorporated
by an Act in accordance with clauses (b), (c), (d), (e) and (f) of
sub-section (4) of section 1 of the Act
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(h)
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Any Body Corporate or Company
or person, or any class of bodies corporate or companies or persons, on a
reference made to the Authority by the Central Government in public interest
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(i)
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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 (h), 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 (h)
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Filing of Form NFRA 1:
Every existing body corporate other than a Company governed by these rules, shall inform the authority within 30 days of the commencement of these rules i.e. by 13.12.2018, in Form NFRA-1, the particulars of the auditor as on the date of commencement of these rules.
Every Body corporate, other than
a company as defined in clause (20) of section 2, formed in India and governed
under this rule shall, within 15 days of appointment of an auditor
under sub-section (1) of section 139, inform the Authority in Form NFRA-1, the
particulars of the auditor appointed by such body corporate.
(Form
NFRA-1 is not available at MCA Website at present)
The term
"body corporate" is defined in Section 2(11) of the Companies Act,
2013. This includes a Private Company, Public Company, One person Company, Small
company, Limited Liability Partnerships, Foreign Company etc.
“Body
corporate” or “corporation” also includes a company incorporated outside India.
However,
body corporate does not include—
(i) a
co-operative society registered under any law relating to co-operative societies;
and
(ii) any other
body corporate (not being a company as defined in the Companies Act 2013),
which the Central Government may, by notification, specify in this behalf.)
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Filing of Annual Return by an Auditor:
Every auditor of the companies
and body corporate covered by this rules
shall file a return with the Authority on or before 30th April
every year in such form as may
be specified by the Central Government.
A Company or a body corporate
other than a company governed under this
rule shall continue to be governed by the Authority for a period of three 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.
Author: Editorial Team – Focal
For
any clarifications/advisory/Professional Assistance, you may reach us @
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