A parliamentary panel on the Companies Bill has called for a calibrated and risk-based approach by the Centre on the proposed ban on non-audit services and a three-year post-audit cooling-off period, while also seeking to curb the expansion of the National Financial Reporting Authority's (NFRA's) regulatory powers. According to reports from Business Standard, the committee, headed by MP Sudheer Gupta, has flagged concerns around excessive delegation of powers to NFRA and suggested that the government should retain the power to appoint the secretary and other employees of the authority to address accountability concerns. The latest developments show the committee has also proposed strengthening NFRA's enforcement powers by allowing the accounting regulator to file complaints before competent courts against any person liable for offences under the Companies Act. This new provision would enable NFRA to take legal action against individuals and entities involved in corporate financial reporting violations.
The panel has warned 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. As reported by Business Standard, the committee stated that this may result in overlap with the statutory functions of ICAI, leading to regulatory duplication, institutional fragmentation, increased compliance burden, and uncertainty regarding jurisdictional boundaries. The panel has asked the Ministry of Corporate Affairs (MCA) to ensure that amendments do not dilute the statutory autonomy granted to the Institute of Chartered Accountants of India (ICAI). The latest recommendations include proposing a new clause that allows NFRA to file complaints before competent courts against any person liable for offences under the Companies Act, further expanding the regulator's enforcement capabilities.
The parliamentary committee described the MCA's proposal to introduce a three-year cooling-off period for auditors as onerous, especially in cases involving group companies, joint audits, mid-term resignation or non-reappointment of auditors. According to the panel's report, the committee criticised the blanket ban on all non-audit services by statutory auditors, saying it may unnecessarily restrict legitimate and low-risk professional services, particularly for MSMEs. The committee recommended that the scope of such prohibition should be clearly defined and that the MCA should restrict enhanced prohibitions to specified high-risk entities to safeguard small companies from disproportionate administrative burdens. The latest developments show the committee has also proposed allowing courts to take cognisance of offences under Section 132(4A) based on complaints filed by persons authorised by the NFRA, further strengthening the regulator's enforcement framework.
The panel has proposed mandatory dedicated insolvency benches at the National Company Law Tribunal (NCLT) through a binding statutory obligation rather than an enabling administrative option. As reported by Business Standard, the committee noted that dedicated benches focused solely on insolvency matters would guarantee strict adherence to statutory resolution timelines. The committee has also proposed a new statutory mechanism for refund of fees paid to the Ministry of Corporate Affairs (MCA) in cases such as unsuccessful filings, duplicate payments and other circumstances. Currently, such refunds are governed through administrative instructions rather than an express provision under the Companies Act. The panel has also recommended converting trusts into limited liability partnerships (LLPs) to be initially limited to single-scheme Alternative Investment Fund (AIF) trusts, with a separate enabling mechanism to be developed for multi-scheme trusts.
The panel has backed the flexible regime for buyback of shares that would allow two offers a year, while underlining the need to define the reckoning of year for determining two buybacks and the computation of the six-month gap. As reported by Business Standard, the committee also criticised the provision in the Bill that requires every partner of an audit firm to be registered with a statutory institute, calling it unnecessary and counterproductive since it would restrict domain experts from forming multidisciplinary partnerships. On Alternative Investment Funds conversion, the panel recommended a carve-out for specified trusts registered by Sebi or IFSCA that operate multiple schemes. The committee has also proposed changes to CSR provisions, recommending deleting the words 'as may be prescribed' to reduce the government's discretion to exempt companies from CSR requirements through rules alone, arguing that empowering the government to exempt classes of companies from CSR provisions through rules amounts to 'excessive delegation'.
