FORM NFRA 1
The Ministry of Corporate Affairs along with the National Financial Reporting Authority has deployed Form NFRA 1 on the website of NFRA i.e. www.nfra.gov.in on July 1, 2019. There has been a lot of confusion with regard to the applicability of Form NFRA 1.
The Ministry of Corporate Affairs vides its Notification No. G.S.R. 1111(E) dated November 13, 2018, notifies National Financial Reporting Authority Rules, 2018. The National Financial Reporting Authority was constituted by the Central Government to provide for matters relating to accounting and auditing standards under this Act. National Financial Reporting Authority shall make recommendations to the Central Government on the formulation and laying down of accounting and auditing policies and standards for adoption by companies or class of companies or their auditors and to monitor and enforce the compliance with accounting standards and auditing standards and to oversee the quality of service of the professions associated with ensuring compliance with such standards, and suggest measures required for improvement in quality of service and such other related matters.
Applicability of NFRA Rules, 2018
The Following class of Companies are governed by NFRA:-
- Companies whose securities are listed on any stock exchange in India or outside India;
- unlisted public companies-
- having paid-up capital of not less than Rs. 500 crores; or
- having an annual turnover of not less than Rs. 1000 crores; or
- having, in the aggregate, outstanding loans, debentures and deposits of not less than Rs. 500 crores as on the 31st March of immediately preceding financial year;
- insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act.
- anybody 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; and
- 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 (1) to (4), if the income or net worth of such subsidiary or associate company exceeds twenty percent. of the consolidated income or consolidated net worth of such company.
Filing of Form NFRA 1
As per the plain reading of the provisions related to the filing of Form NFRA 1:
- Every existing body corporate other than a company governed by these rules shall inform the Authority within thirty 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 clause (20) of section 2, formed in India and governed under this rule shall, within fifteen 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
Provided that a body corporate governed under clause (e) of sub-rule (1) shall provide details of appointment of its auditor in Form NFRA-1.
On a plain reading of the above-mentioned provisions related to the filing of NFRA 1, it might be said that there is some drafting error in the Rules. Since the Rule states that:
"Every existing body corporate other than a company governed by these rules shall inform the Authority within thirty 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."
which can be interpreted as that everybody corporate other than the companies governed by these rules are required to file NFRA-1 within 30 days of deployment of Form NFRA-1, but this might not be the intention of Lawmaker. The details of Auditors of the Companies are already required to be filed on the website of the MCA by the Companies in eForm ADT-1.
If the provisions drafted in the following manner, then there would be more clarity:
"Every existing body corporate, other than a company, governed by these rules, shall inform the Authority within thirty 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."
If the provisions would have been drafted in the above manner, then it clarifies that everybody corporate governed by these rules other than a Company is required to file Form NFRA-1. As the details of the auditors shall be filed by the Company eForm ADT-1 as per the Companies Act, 2013, to avoid repetition of task Companies must be exempted from the provisions. Further, other Body Corporate governed by these Rules are required to file Form NFRA-1.
- Companies are exempted from filing of NFRA-1 since they have to file Auditors' details in form ADT-1
- Body Corporate like companies incorporated or registered outside India to which these Rules apply or Companies governed by special Act are required to file NFRA-1 till July 31, 2019, and NFRA-1 within 15 days of the appointment of auditors.
Law is a matter of interpretation and the Author has taken the utmost care while drafting the article but it may occur that certain error creeps in. This article is for academic purposes and should not be treated as professional advice. The readers are advised to refer to the Bare Acts and Rules before making any judgment.