Background of the Compliance:
To bring in a change and upgrade the concept of consistent growth of CSR so as to align it with the sustainable development and transparency, MCA vide its notification dated February 11, 2022, has introduced a new reporting which highlights the compulsion for the firms who come under the purview of the provision of Section 135(1) of Companies Act, 2013, for filing of Form CSR-2.
Section 135(1) states that every company having the following immediately preceding the financial year shall constitute a CSR Committee of the Board.
- Net worth – INR 500 Crore or;
- Turnover – INR 1,000 Crore or;
- Net Profit – INR 5 Crore.
Thus, as per section 135(5), the Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two percent of the average net profits of the company made during the three immediately preceding financial year.
Therefore, Companies to whom CSR is applicable shall file Form CSR-2 for the financial year 2020-2021 and onwards for the following financial years and the due dates are as follows:
Period of Reporting of the Compliance:
- For financial year 2020-2021 – Separately on or before 31stMarch, 2022;
*However, MCA by notifying Companies (Accounts) Second Amendment Rules, 2022, extended the due date for filing of Form CSR-2 by 2 months, as there were technical difficulties being faced by the stakeholders and therefore, the extended due date for filing form CSR-2 for F.Y. 2020-21 is May 31, 2022.
- For financial year 2021-22 onwards – As an addendum to form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS).
*Due date of AOC-4 – within 30 days of holding AGM of every financial year.
Method of Reporting of the Compliance:
Form CSR-2 is a web-based form to be filled and uploaded on the MCA Portal therein and reporting of the form is non-monetary enabling Companies to do compliance.
Action to be taken for the Compliance:
In order to be compliant towards CSR in all aspects, the Company has to consider and take on record the checklist for confirming the CSR-2 reporting to Registrar of Companies through MCA Portal.
> CIN of the Company;
> Financial year to which the CSR details pertain and SRN of AOC-4 filed for the previous Financial year;
> Details regarding: Net Worth, Turnover, Net Profit;
> Details regarding whether CSR Committee has been constituted and number of meetings held and Directors present and the Company’s website, if any and details to be disclosed on composition of CSR committee, CSR Policy, CSR Projects;
> Details regarding whether Impact Assessment is carried out in pursuance? If yes, whether provided in Board report and web-link?
> Details regarding whether any amount is available for set off in pursuance;
> Details regarding the completion of 3 FY from incorporation;
> Details regarding the net profit and other details for preceding FY; average net profit of the Company; Surplus arising out of the CSR Project;
> Details regarding CSR amount spent for the FY and against which project the amount has been spent: Ongoing Project, Other than ongoing Project or Both;
> Details regarding the amount spent in
-
- Admin overheads;
- Impact Assessment;
- Total amount spent and amount unspent or excess spent for Financial year;
- Amount eligible to be transferred to the unspent CSR Account
- Amount eligible to be transferred to the fund- Schedule VII;
> Details regarding the justification to be provided by the companies if it fails to spend 2% of the average net profit;
> Details regarding if any unspent amount of preceding 3 FY (FY after January 22, 2021) has been spent in the Financial year;
> Details regarding whether any unspent amount pertaining to FY 2014-15 to FY 2019-20 has been spent in the financial year;
> Details regarding whether any capital assets have been created or acquired through CSR spent in the financial year;
> Attachments, if any required to be attached in the Form CSR-2.
Practical issues faced during reporting:
While filing form CSR-2, there were certain issues faced by professional with regards to some pointers in the form. Below mentioned are some of the major issues highlighted:
- For which FY the form should be reported:
- As per MCA notification, in the form, figures of FY 2020-2021 are to be stated. However, practically, the details of FY 2019-2020 should be inserted, as only the figures of FY 2019-2020 would give the perfect picture of applicability of CSR
- Multiple ongoing projects:
- The difficulty in reporting multiple ongoing projects, if the Company has more than one ongoing project in PAN India, as in the form, the tab gets open for one project.
- Losses in FY 2020-2021:
- The confusion regarding the filing of form CSR-2 if there incurred losses in the FY 2020-2021. However, where the Company has to report about the spending in 2020-2021, it is required to file the form before 31st May, 2021. And CSR shall not be applicable on Company in 2021-2022 due to losses in 2020-2021.
- Technical glitch:
- During reporting, MCA Portal showed many errors popping up with the liners about the mismatch in the amounts, extended to raising a ticket for the issues faced.
Conclusion:
MCA has taken a step towards corporate governance by introducing a Form CSR-2 for tracking the activities and the funds towards CSR obligation and that we can justify that Form CSR-2 has covered every aspect for ensuring the responsibility of the Corporate person in fulfilling the obligation towards Corporate Social Responsibility covering applicability of CSR, expenditure to be made, reporting on the amount spent towards obligation, status of the ongoing project, etc. Therefore, Every Company coming under the purview of section 135 shall comply with it by filing the form as an addendum to form AOC-4 from the FY 2021-2022 and so on.
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