MCA introduces new Form CSR -2: A step towards more transparent CSR reporting

MCA  introduces  new  Form  CSR  -2:   

A  step  towards  more  transparent  CSR reporting :

News Dated 11.02.2022

The Central Government has notified the Companies (Accounts) Amendment Rules,2022. As per amended rules, every company covered under u/s 135 shall furnish a report on Corporate Social Responsibility in E-Form CSR-2 to the Registrar for the preceding financial year (2020-2021) and onwards. The CSR-2 is to be filed as an addendum to Form AOC-4/AOC-4 XBRL/AOC-4 NBFC (Ind AS) as the case may be. However, form CSR-2 for the F.Y.2020-21 shall be filed separately latest by 31stMarch 2022. Companies falling under section 135 are required to spend a certain %of their profits on CSR as specified in the section. Earlier there was no form prescribed to furnish a report on CSR. 

Now through this notification ministry introduced the same.

1.  Objective of Amendment : Company is a part of society and has duties towards it. Corporate Social Responsibility (CSR) is pragmatic responsiveness to stakeholders, consumers, and civil society. It is the deliberate inclusion of public interest into corporate decision-making. Further, Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. As a part of the good corporate governance practice MCA on 11thFeb 2022 notified Form CSR-2. Now it is mandatory for corporates to furnish the details of the CSR spent to the Ministry through this form. Earlier no such form was prescribed. Section135 of the act only mandates to annex the details of CSR to its Board Report and also disclose o the website of the Company, if any.CSR-2, may be useful for data mining and analysis for the MCA to introduce better policies on this front.

2.  Applicability of CSR-2Every class of companies which are falling under section 135 of the Act i.e. having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during immediately preceding financial year shall file form CSR- 2.

3. What is the due date for filing CSR-2?(a)F. Y. 2020-21: CSR-2 is to be filed separately on or before 31st March, 2022(b)F. Y. 2021-22 onwards: CSR-2 is to be filed as an addendum to form AOC-4/AOC-4 XBRL/AOC-4 NBFC (IND AS) as the case may be.

4.  Form CSR – 2:

4.1: DisclosuresCSR-2 requires a company to disclose its net worth, turnover, net profits of a particular financial year which triggers the CSR applicability. Apart from that details with regard to constitution of the CSR committee, their meetings, CSR policy,approved CSR projects, amount required to spend as per sec 135, actual amount spent, details of the project on which amount is to be spend, excess amount spent if any etc are also required to be reported.

4.3 New concept of Project ID has been introduced A new concept of the generation of Project ID has been introduced through the Form. Project ID may serve as a reference ID to track the CSR activities of the Company.

4.4 How to file from CSR-2?The form CSR-2 is to be filed with Registrar for the preceding financial year (2020-2021) and onwards as an addendum to Form AOC-4 or AOC-4 XBRL or AOC-4NBFC (Ind AS), as the case may be. However, for the preceding financial year (2020-2021), Form CSR-2 shall be filed separately on or before 31st March 2022, after filing Form AOC-4 or AOC-4XBRL orAOC-4 NBFC (Ind AS), as the case may be.

4.2 Form to be digitally signed by the Director of the Co. Form is to be digitally signed by any one of the directors of the company authorised by the Board.

4.4.  Whether CSR -2 need to be certified? The form is on self-declaration basis, therefore, no certification from practising professionals like Company Secretary (CS), Chartered Accountant (CA) or Cost Accountant (CMA) is required.

4.5 Penalty on failure to file form CSR-2In the notification, no separate penalty is specified for non-filing of the form. The general penalty for filing incorrect details attract penalty to provisions of Section448 and 449 which provide for punishment for false statement / Certificate and punishment for false evidence respectively.

5.  Concluding remarks The form CSR-2 as notified by the Ministry is a welcoming step.It will further promote the good corporate governance practice in India. The form is detailed in nature. The form captures every minute detail relating to CSR which would result in more transparent disclosures by the corporates.