MCA UPDATE-National Financial Reporting Authority Rules, 2018

The Ministry of Corporate Affairs (MCA) vide notification dated 13^th November, 2018 notified the National Financial Reporting Authority (NFRA) Rules, 2018.

Applicability of the rules:

NFRA Rules are applicable to the following companies and bodies corporate:

• Companies whose securities are listed on any stock exchange in India or outside India
• Unlisted public companies who have as on 31st March of immediately preceding financial year:
• Paid up capital of not less than Rs. 500 Cr. or
• Annual turnover of not less than Rs. 1000 Cr. Or
• Aggregate outstanding loans, deposits, debentures of not less than Rs. 500 Cr.
• Insurance companies
• Banking companies
• Companies engaged in the generation or supply of electricity
• Companies governed by any Special Act
• Bodies corporate incorporated by an Act in accordance with Section 1(4)(except companies incorporated under Companies Act, 2013 or any previous Companies Act)
• Any company, body corporate, person or class of bodies corporate or companies or persons referred by Central Government to NFRA in public interest
• Foreign subsidiary or associate company of an Indian Company or body corporate which is governed by these Rules, if the net worth OR income of such foreign subsidiary or associate company is  more than 20% of the consolidated income OR consolidated net worth of such Indian Company or body corporate.

Compliance to be done by Companies and Bodies Corporate (Indian & Foreign)

Particulars	Time period	Form No.
All existing Indian and foreign bodies corporate, other than companies, governed by these Rules	Within 30 days of commencement of these Rules	NFRA-1 (Particulars of Auditor as on the date of commencement of these Rules)*
Indian Bodies Corporate (other than companies) governed by these Rules	Within 15 days from the date of appointment of Auditor	NFRA-1 (Particulars of Auditor appointed)*
Foreign subsidiary or foreign associate company, of an Indian company or Indian body corporate, governed by these Rules (as per applicability criteria mentioned above)	Within 15 days from the date of appointment of Auditor	NFRA-1 (Particulars of Auditor appointed)*

*Auditor means individual, firm (including LLP) as appointed under Section 139(1) of the Companies Act, 2013 or under any Act in force

Other Highlights of the rules

Following are the other important highlights in the rules:

• Companies or bodies corporate which cease to meet the criteria for applicability of these rules, shall continue to be governed by the Rules for a period of 3 years after it ceases to be listed, or its paid up capital, turnover or aggregate deposits, debentures loans fall below the limits specified;
• The Rules also prescribe various functions and duties of the NFRA such as recommending accounting and auditing standards for approval of Central Government, overseeing the quality of Audit service and suggesting measures for improvement etc;
• Auditors of companies and bodies corporate governed by these Rules are required to file a Return with the NFRA in a form, on or before 30th April every year, in such form and in such manner as may be prescribed by the Central Government;
• The NFRA shall recommend accounting and auditing standards for the approval of Central Government;
• The Rules also prescribe guidelines to the NFRA for monitoring and enforcing compliance with accounting standards and auditing standards by companies and bodies corporate governed by these Rules;
• NFRA will have power to investigate either suo motu or by reference from Central Government, matters of non-compliance, professional or other misconduct in respect of companies and bodies corporate governed by these Rules;
• NFRA has power to investigate matters and initiate action against auditors for professional or other misconduct lies in respect of companies and bodies corporate governed by these Rules and such power in respect of such companies and bodies corporate shall lie only with the Authority and no other Institute or body;
• The Rules also prescribe procedure to conduct disciplinary proceedings, Manner of enforcement of orders passed in disciplinary proceedings, Punishment in case of non-compliance etc;
• NFRA can provide and receive assistance from foreign independent audit regulators in investigation of an auditor in accordance with Indian laws on such terms as it deems fit.

Notification can be downloaded from the following link:

http://www.mca.gov.in/Ministry/pdf/NFRARules2018_13112018.pdf