Changing Legal Landscape of CSR Reporting in India – MCA Form CSR 2: Furnishing CSR Report with Facts

 

Background

When the Corporate Social Responsibility (‘CSR’) concept was introduced in India in 2013, it was intended to be a voluntary exercise and corporates were expected to maximise their contributions for social causes to create a niche in the market with inherent benefit of effective brand building. However, in the past, it has been observed that the CSR funds were not being channelized in their true spirit by certain organisations and resultant abuse of the CSR provisions. The Government of India has been pushing Indian corporates to conduct their businesses with greater transparency, curtail abuse, reinforce governance and provide comprehensive reporting of their activities. Of late, a number of changes in the CSR provisions have been announced, as a result of which CSR has evolved from a voluntary and public-spirited approach to an obligatory drill for staying compliant.

 

Recent Amendments

A.      In January 2021

Last year the Ministry of Corporate Affairs (“MCA”) remodelled the CSR concept and introduced certain amendments to CSR provisions in the Companies Act, 2013, having the effect for the companies to comply or pay/suffer. The changes ranged from the defined sphere for carrying out CSR activities, transfer of unspent CSR funds, details of capital assets created and introduction of form CSR-1 (as one of the mandatory eligibility criteria for certain NGOs to receive CSR funds), etc.

 

B.      In February 2022

This year, the MCA vide its notification dated 11th February, 2022 has notified Companies (Accounts) Amendment Rules, 2022 which has come into force from 11th February 2022 and introduced form CSR-2 (report on Corporate Social Responsibility). In the form CSR-2, the details pertaining to the entity, constitution of CSR committee, whether or not the company has disclosed on its website details about its CSR committee, impact assessment, details of amount spent in the preceding financial years, unspent amount of CSR, ongoing projects, transfer of unspent amount of CSR, creation of capital assets etc. are to be disclosed.

The said Rules provides that every company covered under the provisions of section 135(1) of the Companies Act, 2013 shall be required to furnish a report on CSR in MCA Form CSR-2 to the Registrar of Companies commencing from the preceding financial year (2020-21). For the inaugural year, Form CSR-2 was required to be filed separately, initially on or before 31st March 2022, after filing of the relevant Form for Annual Financial Statements. However, due to technical difficulties being faced by the stakeholders, the MCA has extended the due date by 2 months by notifying Companies (Accounts) Second Amendment Rules, 2022. Accordingly, Form CSR-2 for the financial year 2020-21 is now to be filed latest by 31st May 2022. From the financial year 2021-2022 onwards, Form CSR-2 is to be filed as an addendum to Form for Annual Financial Statements i.e. as an attachment for Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be.

 

Major Points to be furnished in Form CSR-2

1.       Basic information of the Company:

a.        Corporate Identity Number (CIN) of the company

b.       Name of the company

c.        Address of the registered office of the company

d.       email ID of the company

 

2.       CSR Reporting for the year

a.        Financial Year to which the Corporate Social Responsibility details pertain: From:           To:   

b.       SRN of form AOC-4/ AoC-4 XBRL/ AoC-4 NBFC filed by the company for its standalone financial statements

 

3.       CSR applicability Criteria

a.        Net worth

b.       Net Profit

c.        Turnover

d.       Criteria that triggered the CSR applicability –

 

4.       Details of CSR Committee and meetings, website, Impact Assessment and set off amount

a.        Details of CSR Committee meetings:

                                                                           i.      Whether CSR Committee has been constituted – Yes/ No/ Not Applicable

                                                                         ii.      Number of directors composing CSR Committee

                                                                       iii.      Number of meetings of CSR Committee held during the year

 

b.       Details on Company’s Website-

                                                                           i.      Whether the company has a website - Yes/No

                                                                         ii.      If yes, provide web-link:

                                                                       iii.      Disclosure of following information on Company’s website in pursuance of Rule 9 of Companies (CSR Policy) Rules, 2014:

·       Composition of CSR Committee - Yes/ No/ N.A.

·       CSR Policy - Yes/ No

·       CSR Project Approved by Board - Yes/ No

c.        Details of CSR Impact Assessment

                                                                           i.      Whether Impact assessment of CSR projects is carried out in pursuance of sub-rule (3) of Rule 8 of Companies (CSR Policy) Rules,2014, if applicable– Yes/ No/ Not Applicable

                                                                         ii.      If Yes, whether the same has been disclosed in the Board Report – Yes/ No

                                                                       iii.      Provide web-link, if any

 

d.       Complete details of amount available for Set-off – year wise break-up for THREE Financial years:

                                                                           i.      Whether any amount is available for set off in pursuance of sub-rule (3) of Rule 7 of Companies (CSR Policy) Rules, 2014 - Yes/ No

                                                                         ii.      If yes, provide details:

 

5.       Details of Completed Financial Years Since Incorporation:

1. Whether the company has completed the period of three financial years since its incorporation – Yes/ No
2. If no, then provide the number of financial years completed since incorporation:
3. Net Profit & Other Details for the preceding financial years:

Note: Details of Adjusted Profit under Rule 2(1)(h) of CSR Rule 2014 to be worked out by excluding the following:

                                                               i.      any profit arising from any overseas branch or branches of the company, and (ii) any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act

4. Average Profit of the Company as per Section 135(5)

 

6.       Details of CSR Expenses

a.        2% of Average net profit of the company as per section 135(5):

b.       Surplus arising out of the CSR projects/ programs or activities of the previous financial year, if any:

c.        Amount required to be set off for the financial year, if any:

d.       Total CSR obligation for the financial year (6a+6b-6c):

 

7.       Details of CSR Spending

1. Whether CSR amount for the financial year has been spent: Yes/ No
2. If yes, CSR amount has been spent against and no. of projects:

o   Ongoing Project:

o   Other than Ongoing Project:

o   Both (Ongoing & other than Ongoing):

3. Amount spent in Administrative Overheads
4. Amount spent on Impact Assessment (if applicable)
5. Total amount spent for the Financial Year
6. Amount unspent/ (excess) spent for the Financial Year [6(d)-7(e)] (unspent for Ongoing projects
7. Amount eligible for transfer to Unspent CSR Account for the Financial Year as per Section 135(6) (before adjustments)
8. Amount to be transferred to Fund specified in Schedule VII for the Financial Year (if total unspent for the Financial Year is greater than unspent for Ongoing projects)

 

8.       Details of transfer of Unspent CSR account as mount for FY

a.        Transfer to Unspent CSR account as per Section 135(6)

b.       Transfer to Fund specified in Schedule VII as per second proviso to Section 135(5) for the Financial Year:

 

9.       To specify the reason(s) if the company has failed to spend two per cent of the average net profit as per section 135(5) on CSR Activities:

 

10.   Details of CSR spending pertaining to preceding financial years (FY ending after CSR amendment dated 22nd January 2021), spent in current financial year (if any) : Yes/ No

a.        Details of CSR amount spent in the financial year pertaining to three preceding financial year(s):

b.       Details of CSR amount spent in the financial year for ongoing projects of the preceding financial year(s): Number of Ongoing Projects

c.        Details of New Projects from unspent amount

                                                         i.            Whether any new CSR project has been undertaken in the financial year from the Unspent amount pertaining to preceding three financial years – Yes / No

                                                       ii.            If yes, nature of the new CSR Project(s) is/are :

o   Ongoing project(s)

o   Other than Ongoing project(s)

o   Both (Ongoing and Other than Ongoing projects)

                                                     iii.            Details of amount spent against new ongoing CSR project in the financial year:

Number of Ongoing Projects:

                                                      iv.            Details of amount spent against new other than ongoing projects in the financial year:

Number of Other than Ongoing Projects:

11.   Whether any unspent amount pertaining to FY 2014-15 to FY 2019-20 has been spent in the financial year - Yes / No

Details of amount spent on CSR project in the Financial Year:

Number of CSR Projects:

 

12.   Whether any Capital Asset is acquired/ Created through CSR spending in the FY -  Yes/ No

If Yes, enter the number of Capital assets created/ acquired:

Furnish the details relating to such asset(s) so created or acquired through CSR spent in the financial year:

(All the fields should be captured as appearing in the revenue record, flat no, house no, Municipal Office/Municipal Corporation/ Gram panchayat are to be specified and also the area of the immovable property as well as boundaries)

 

13.   Declaration:

14.   To be digitally signed by any one Director stating the Designation and DIN

(For filling of e-form CSR, visit MCA website)

 

Concluding remarks

The Form CSR-2 would be an effective tool for helping the authorities to integrate, analyse and investigate the CSR data so that improved and effective policies can be introduced in future. Furthermore, the amendment is expected to ensure that the CSR funds are spent in a righteous manner and the money unspent is not diverted for unintended purposes or back into the company’s assets. It is very important for Companies to comply with the said amendments with utmost care and diligence.