The NFRA rules, 2018 have been made applicable since 13.11.2018 by the MCA with intent to tap financial scams that the nation witnessed and to have a control over the workings of the Auditors.
NFRA is an independent authority to control over the auditors and has been given a wide range of powers to monitor and enforce compliance of both accounting and auditing standards and to investigate into matters of professional misconduct of the auditors and to initiate disciplinary proceedings towards an auditor.
Form NFRA 1 has been deployed recently on www.nfra.gov.in ON 01.07.2019. Post deployment of form there has been lot of confusion with regards to applicability of the same. This article aims to clear all such ambiguity in the minds of professionals with respect to applicability of NFRA 1 eform.
Q. TO WHOM IS THE NFRA RULES APPLICABLE TO ?
Ans: REFER THE CHART BELOWQ. TO WHOM THE RULES ARE NOT APPLICABLE ?
ANS: Considering the above rule 3, following classes of companies will not be governed by NFRA:
1. Private Companies whose SECURITIES ARE NOT LISTED on any exchange;
2. Unlisted public companies with paid-up capital or turnover or aggregate of loans, debentures and deposits below the limit stated in Rule 3(1) and
Ambiguities in the Rules
On a plain reading of the provisions of Rule 3 (2) of the NFRA Rules, it is evident that there is certainly a drafting error.
The provisions requires the companies which are not covered by the NFRA Rules, to file form NFRA-1, intimating about the details of the auditors !!
This certainly is not the intent of the law makers.
NFRA 1 FORM FILING – BY COMPANIES / BODY COPORATES :
We must know that Three class of entities will be regulated by NFRA.
2. body corporates and
The Forms filing can be classified in two parts:
1. INITIAL OR ONE TIME DISCLOSURE ON THE COMMENCEMENT OF THE RULES
Please note only certain companies and bodies corporate are covered by the Rules.
ONLY THOSE Body corporate which are covered by the rules, excluding companies, shall within 30 days from the date of commencement of the Rules, shall inform the Authority about the particulars of the auditors, in form NFRA-1.
So, Cos. covered by the Rules are not required to file any form.
2. DISCLOSURES ON THE APPOINTMENT OF THE AUDITORS
Every body corporate COVERED BY THESE RULES shall within 15 days of appointment of an auditor, inform the Authority about the particulars of the auditors appointed by the body corporate, in form NFRA-1.
NOTE: Exemption has been granted to Indian companies from this requirement.
If you have a doubt on BODY CORPORATES COVERED BY THESE RULES. Please refer the chart above.
NFRA – 1 FORM FILING BY THE AUDITORS (ANNUAL RETURN)
EVERY AUDITOR GOVERNED BY THE AUTHORITY 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.
E- FILING PROCESS:
The form NFRA 1 shall be filed on https://eformnfra.nic.in/
The website requires registration and the complete process can be referred here:
LAST DATE OF FILING THE FORM NFRA – 1
As per the circular issued by NFRA dated 01.07.2019 the last day of filing this form is 31.07.2019.
CONSEQUENCE IN CASE OF NON-COMPLIANCE
If 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 companies Act, 2013.
Author: Rahul Harsh is a Company Secretary from Kolkata and is currently working with Peerless Group of Companies. He may be reached at: firstname.lastname@example.org
DISCLAIMER: Law is a matter of interpretation and the Author have taken utmost care while drafting the article but it may occur that certain error creeps in. This article is for academic purpose and should not be treated as a professional advice. The readers are advised to refer the Bare Acts and Rules before making any judgment.