Pursuant to the notifications dated October 1, 2018 and October 24, 2018, the National Financial Reporting Authority (‘NFRA’) has been constituted and the Ministry of Corporate Affairs (‘MCA’) has notified the provisions under the Companies Act, 2013 (‘Companies Act’) dealing with the powers and duties of the NFRA, appeals against orders of the NFRA as well as certain procedural and compliance requirements for the NFRA. NFRA’s duties include making recommendations to the Central Government on accounting and auditing policies and standards for adoption by companies and their auditors, monitoring and ensuring compliance with the aforementioned accounting and auditing standards, and overseeing the quality of services of professions associated with these. NFRA has been granted the authority, inter alia, to investigate matters of professional or other misconduct committed by any member or firm of chartered accountants, and to pass orders (covering both imposition of fine and debarment) in such matters. An appeal against an order of the NFRA can be preferred before the Appellate Tribunal. However, the rules in relation to this are yet to be prescribed.

Subsequently, on November 13, 2018, the MCA also notified the National Financial Reporting Authority Rules, 2018 (‘NFRA Rules’) which specify that, inter-alia, the following classes of companies and auditors are subject to the governance and supervision by the NFRA in relation to accounting and auditing standards and compliances:

(i)      Indian companies listed in India or overseas;

(ii)     unlisted public companies with paid up capital of INR 500 crores (approx. US$ 72 million) or more, or annual turnover of INR 1000 crores (approx. US$ 140 million) or more, or having outstanding loans, debentures and deposits (in aggregate) of INR 500 crores (approx. US$ 72 million) or more, in each case as of March 31 in the previous financial year;

(iii)    insurance companies, banking companies, electricity generating and supply companies and companies governed by a special legislation;

(iv)     any body corporate or person who is referred to the NFRA by the Central Government in public interest; and

(v)     any foreign body corporate which is a subsidiary or an associate company of an Indian company or other body corporate referred to in (i) to (iv) above, provided that the income or net worth of such foreign subsidiary or associate company exceeds 20% of the consolidated income or consolidated net worth of such Indian company or other body corporate.

All existing body corporates covered under the NFRA Rules (other than companies governed by the NFRA Rules) are required to file Form NFRA-1, setting out the particulars of their respective auditors, within 30 days from the date of deployment of Form NFRA-1.