NFRA Rules, 2018 — Companies and Bodies Corporate Governed by NFRA
# NFRA Rules, 2018 — Coverage of Companies and Bodies Corporate
The NFRA Rules, 2018 prescribe the class of companies and bodies corporate whose auditors fall under NFRA's jurisdiction for monitoring, enforcement, oversight, or investigation.
## Five Categories Covered by NFRA
### 1. Listed Companies
Companies whose securities are listed on any stock exchange in India OR outside India.
### 2. Large Unlisted Public Companies
Unlisted public companies meeting ANY ONE of the following thresholds (as on 31st March of the immediately preceding financial year):
Criterion
Threshold
Paid-up capital
≥ `500 crores
Annual turnover
≥ `1,000 crores
Total outstanding loans, debentures, and deposits
≥ `500 crores
### 3. Special Sector Companies
Regardless of size:
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 the Companies Act, 2013
### 4. Companies Referred by Central Government
Any body corporate or company or person, or any class of bodies corporate or companies or persons, on a reference made to NFRA by the Central Government in public interest.
### 5. Overseas Subsidiaries/Associates of Indian Companies
A body corporate incorporated or registered outside India, which is a subsidiary or associate of any company or body corporate incorporated or registered in India referred to in clauses (1) to (4) above — IF:
The income OR net worth of such subsidiary/associate company exceeds 20% of:
The consolidated income; OR
The consolidated net worth
of such Indian company/body corporate.
## Form NFRA-1 Filing
Every existing body corporate (other than a company governed by these rules) shall inform NFRA in Form NFRA-1:
Within 30 days of commencement of NFRA Rules;
The particulars of the auditor as on the date of commencement of these rules.
## Continued Jurisdiction After Ceasing to Meet Criteria
A company or body corporate (other than a company) governed under NFRA Rules shall continue to be governed by NFRA for 3 years after it ceases to be:
Listed; OR
Its paid-up capital, turnover, or aggregate of loans/debentures/deposits falls below the threshold.
## Memory Aid
Five Buckets:
1. Listed (anywhere — India or abroad)
2. Big Unlisted Public (500/1000/500 crore thresholds)
5. Foreign Sub/Associate (20% income or net worth test)
Hangover Rule: Once in, stay in for 3 years even after falling out of criteria.
Form: NFRA-1 within 30 days of commencement.
Worked example
### Example 1
Example 1: ABC Ltd is an unlisted public company with paid-up capital of `300 crores, turnover of `1,200 crores, and outstanding loans of `400 crores as on 31st March 2025. Is ABC Ltd governed by NFRA Rules?
Answer: Yes. Although paid-up capital (`300 cr) and loans (`400 cr) are below their respective thresholds (`500 cr each), the turnover of `1,200 crores exceeds the `1,000 crore threshold. Since the criteria operate independently (only ANY ONE needs to be met), ABC Ltd falls under NFRA jurisdiction.
### Example 2
Example 2: XYZ Ltd is a listed Indian company. Its Singapore subsidiary has net worth of `150 crores. XYZ's consolidated net worth is `600 crores. Is the Singapore subsidiary governed by NFRA?
Answer: Yes. The Singapore subsidiary's net worth (`150 cr) as a percentage of XYZ's consolidated net worth (`600 cr) = 25%, which exceeds the 20% threshold. Since XYZ is a listed Indian company (Category 1), and the foreign subsidiary crosses 20% of consolidated income/net worth, it falls under Category 5 of NFRA Rules.
### Example 3
Example 3: PQR Ltd was a listed company until 31st March 2024, when it got delisted. On 31st March 2026, can NFRA still investigate its audit for FY 2025-26?
Answer: Yes. The 3-year continued jurisdiction rule means NFRA can govern PQR Ltd until 31st March 2027 (3 years from delisting on 31st March 2024). FY 2025-26 falls within this period.
### Example 4
Example 4: A small private insurance company has paid-up capital of just `10 crores. Is it under NFRA jurisdiction?
Answer: Yes. Insurance companies fall under Category 3 (Special Sector Companies) REGARDLESS of size. Size thresholds do not apply to insurance, banking, electricity, special Act, and Act-incorporated bodies corporate.
⚠️ Common exam mistakes
Believing the three thresholds for unlisted public companies must be met CUMULATIVELY — only ONE needs to be met.
Applying size thresholds to banking/insurance/electricity companies — these are covered REGARDLESS of size.
Forgetting the foreign subsidiary 20% test (income OR net worth) — both are alternative tests, not cumulative.
Missing the 3-year continued jurisdiction (hangover) rule — companies do not exit NFRA immediately upon falling below thresholds.
Confusing the cutoff date — thresholds are tested as on 31st March of the immediately preceding financial year.
Forgetting that Category 5 (foreign subsidiaries) is linked to clauses (a) to (d), i.e., the parent must itself be governed by NFRA Rules.
Filing Form NFRA-1 late (beyond 30 days of commencement).
Bare-Act text Rules under Section 132 · NFRA Rules, 2018 (framed under Section 132 of the Companies Act, 2013) · click to expand
As per NFRA rules, NFRA shall have power to monitor and enforce compliance with accounting standards and auditing standards, oversee the quality of service or undertake investigation of the auditors of the following class of companies and bodies corporate: 1. Companies whose securities are listed on any stock exchange in India or outside India. 2. Unlisted public companies having Paid-up capital: ≥ ₹500 crores or Annual turnover: ≥ ₹1000 crores, Total outstanding loans, debentures and deposits: ≥ ₹500 crores as on the 31st March of immediately preceding financial year. 3. Insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act for the time being in force or bodies corporate incorporated by an Act in accordance with the Companies Act, 2013. 4. Any Body Corporate or company or person, or any class of bodies corporate or companies or persons, on a reference made to the NFRA by the Central Government in public interest; and 5. 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 (a) to (d) above, if the income or net worth of such subsidiary or associate company exceeds 20% of the consolidated income or consolidated net worth of such company or the body corporate, as the case may be, referred to in clauses (a) to (d) above. Every existing body corporate other than a company governed by these rules, shall inform the NFRA within 30 days of the commencement of NFRA rules, in Form NFRA-1, the particulars of the auditor as on the date of commencement of these rules. A company or a body corporate other than a company governed under NFRA Rules shall continue to be governed by the NFRA for a period of 3 years after it ceases to be listed or its paid-up capital or turnover or aggregate of loans, debentures and deposits falls below the limit stated therein.