Parliamentary panel supports more power to NFRA but with riders

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Dimple Bhati

A Parliamentary Panel has supported government’s move to further empower National Financial Reporting Authority (NFRA) but with certain checks. At the same time, it also has suggested that buyback of equity shares in any financial year shall not exceed 25 percent of its total paid-up equity capital in that financial year.Also, it recommended the Central government may notify a comprehensive framework to facilitate the conversion of specified trusts into limited liability partnerships. All these are parts of 169 recommendation are part of report submitted to Parliament by the Joint Committee on the Corporate Laws (Amendment) Bill. Now based on the report, government is expected to rework the Bill, get Cabinet approval and then move the Bill for consideration and passage.Expanded powersIn its report, the committee felt that the expanded powers for registration, investigation, delegated regulation-making powers and the proposed body corporate status may broaden NFRA’s role beyond its original oversight function. “In the considered opinion of the committee, this may result in overlap with the statutory functions of ICAI (Institute of Chartered Accounts of India) leading to regulatory duplication, institutional fragmentation, increased compliance burden, and uncertainty regarding jurisdictional boundaries,” it said.Accordingly, it recommended the Ministry take steps to ensure that amendments to the Companies Act not dilute or override the statutory autonomy granted to ICAI under the Chartered Accountants Act, 1949. Instead, “the legislative framework must allow a harmonious coexistence where NFRA’s role under the Companies Act remains strictly focused on corporate financial oversight, leaving professional development, standard-drafting foundations, and primary domain matters to the statutory purview of ICAI,” it said.BuyBack limitsOn this issue, the committee took cognizance of lack of requisite clarity on the permissible buy-back limits of 25 per cent on paid-up capital, free reserves and on equity shares as the case may be. There is also need to clarify the reckoning of year for determining two buy backs and the computation of six months gap between the previous and following buy back.Accordingly, it suggested modification to ensure buy-back of equity shares in any financial year shall not exceed 25 percent of its total paid-up equity capital in that financial year.Conversion of TrustAccording to the Committee, where a specified trust operates or maintains multiple schemes, or such other structure which is not already covered under this Schedule, a framework may be provided for conversion of such trust into a limited liability partnership, subject to such conditions, and procedure, as may be prescribed, suggested the committee.“The Central government may notify a comprehensive framework to facilitate the conversion of specified trusts into limited liability partnerships, including provisions relating to taxation, capital gains, stamp duty, transfer and vesting of assets and liabilities, filing and compliance requirements, continuation of rights and obligations, and other consequential or incidental matters arising from such conversion,” it said.Key recommendations- Insertion of new Section to provide subordinate rule-making power for handling personal data in compliance with the Digital Personal Data Protection Act, 2023- insertion of new Chapter to enable seamless re-domiciliation of foreign companies to IFSC without requiring winding-up in their home jurisdiction.- Replacing fine, which may extend to Rs 1 lakh with fixed penalty amount of Rs. 50 thousand in cases where companies default in compliance with provisions in line with the objective of decriminalisation and rationalisation exercise- Delete imprisonment provisions for failure to comply with NFRA orders in line with decriminalisation, and desired that penalty recoveries- Exemption from mandatory statutory audit be allowed to private companies only facilitating to achieve the objective of reducing compliance requirement for small businesses- Reduce the minimum age for appointment as Managing Director, Whole-time Director or Manager from 21 years to 18 years and raising the maximum age from 70 years to 75 years- Published on August 3, 2026