The National Financial Reporting Authority (NFRA) is an independent regulatory body constituted under Companies Act 2013 (Section 132). The constitution of this authority is effective from 1st October 2018. The main purpose of the NFRA is to assist in the framing and enforcement of legislation relating to accounting/auditing. It is an effort by the Indian Government to improve investor and public confidence in the financial reporting of an entity.
Rule 3(1): Which companies or corporate bodies will be governed by NFRA rules?
As per notification published by the Ministry of Corporate Affairs on 13th November 2018, NFRA has the power to investigate and conduct quality reviews for the following types of companies:
- Listed companies
- Unlisted companies whose:
- Net worth is 500 crore or
- Paid up capital is Rs. 500 crore or
- Annual turnover is Rs. 1000 crore
- Outstanding loans, debentures and deposit of more than Rs. 500 crore
(As on 31st March of the preceding financial year)
- Insurance companies
- Banking companies
- Companies in the business of generation or supply of electricity
- Companies governed with special act
- Companies incorporated in reference with clauses (b) to (f) of Section 1(4) of the Act
- Any reference made by Central Government to NFRA authority in public interest
- Body corporate registered outside India (a subsidiary or associate company of companies or body corporates registered in India) with income or net worth exceeding 20% of consolidated income or net worth of the Indian company or body corporate
Rule 3(2): Which companies have to file Form NFRA-1?
The following companies have to file Form NFRA-1 providing details of auditors within 30 days of rules being notified, i.e. the deployment of Form on the NFRA website at https://nfra.gov.in/:
- Private companies
- Unlisted companies which are not covered under Rule 3(1)
- Any other companies or body corporates which are not governed under NFRA authority and NFRA Rules
For these companies, the last date for filing Form NFRA-1: 31st July 2019.
The companies governed by the NFRA under Rule 3(1) are not required to file form NFRA-1.
Rule 3(3): Which body corporates have to file Form NFRA-1 on appointment of auditor within 15 days?
Body corporates other than companies as defined under Section 2(20) must file Form NFRA -1 to intimate the appointment of an auditor within 15 days.
Are you a company governed by the NFRA under Rule 3(1)? You must file Form NFRA-1 by 31st July or face penalties!
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