MCA Notifies Changes in Filing Financial Statements and CSR Reporting
Summary
Companies and non-bank lenders in India have until March 2024 to file their mandatory corporate social responsibility (CSR) report with the corporate affairs ministry for the financial year that ended in March 2023. The CSR-2 form shall be filed “on or before 31 March 2024” after filing financial statements in applicable forms. The new form that businesses covered under Section 135 of the Companies Act, 2013, are required to file. As per this, every company having a net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more in the previous financial year, has to spend 2% of net profits on CSR.
Amendments in Corporate Rules: A Major Move by MCA
The Ministry of Corporate Affairs (MCA) has announced an important amendment in the Companies (Accounts) Rules, 2014. As per the Companies (Accounts) Second Amendment Rules, 2023, dated 2nd June 2023, Rule 12 concerning the filing of financial statements and related fees has been revised.
Changes in Filing Requirements: Implications for NBFCs
The changes demand that companies will need to file Form CSR-2 separately on or before 31st March 2024, following the filing of Form No. AOC-4 or Form No. AOC-4-NBFC (Ind AS). This modification impacts all NBFCs and their subsidiaries, holding, associate companies, or joint ventures boasting a net worth of Rs. 500 crore or more.
The Announcement: A Detailed Look
The announcement stated, “In exercise of the powers conferred by sub-section (1) and (3) of section 128, subsection (3) of section 129, section 133, section 134, sub-section ( 4) of section 135, sub-section (1) of section 136, section 137 and section 138 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Accounts) Rules, 2014.”
The New Proviso: What It Means
The newly inserted proviso reads as follows: “Provided also that for the financial year 2022-2023, Form CSR-2 shall be filed separately on or before 31st March, 2024 after filing Form No. AOC-4 or Form No. AOC-4-NBFC (Ind AS), as specified in these rules or Form No. AOC-4 XBRL as specified in the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015 as the case may be.”
Implications for CSR Leaders: A New Era in Corporate Governance
These amendments are in effect from the date of their publication in the Official Gazette and have far-reaching implications for CSR leaders. The separate filing of Form CSR-2 signifies a major shift in reporting requirements, emphasizing a more in-depth commitment to corporate social responsibility reporting.
What is the CSR-2 form?
The CSR-2 form is a report on Corporate Social Responsibility in India that is required to be filed by the companies that are covered under the provisions of section 135 of the Companies Act, 2013123. The form contains details about the company’s CSR activities, such as the constitution of the CSR committee, impact assessment, amount spent, unspent amount, ongoing projects, etc.
Concluding Remarks: Aligning with New Norms
These developments mark a new chapter in India’s corporate governance framework and urge companies to carefully consider their corporate social responsibility initiatives. It is essential for companies and CSR leaders to adhere to the latest notification and align their reporting procedures in line with the new rules to avoid any regulatory complications.
Key points
The government changed rules from 22 January 2021 to allow companies more flexibility to spend more than their legally binding annual CSR obligation in a given year, which can be adjusted against their spending obligations in future years. The new rules also introduced monetary penalty for companies and officers in default for not meeting their obligation.
- Companies and non-bank lenders have until March 2024 to file their mandatory CSR report for the financial year ended March 2023.
- The CSR-2 form shall be filed “on or before 31 March, 2024” after filing financial statements in applicable forms.
- Companies covered under Section 135 of the Companies Act, 2013, are required to file the new CSR-2 form.
- Companies with a net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more in the previous financial year, have to spend 2% of net profits on CSR.
Implications for CSR Leaders
- Companies and non-bank lenders in India should take note of the extended deadline for filing their mandatory CSR report for the financial year ended March 2023.
- The new CSR-2 form is now required for filing, so companies should ensure they are familiar with the new requirements.
- Companies meeting the criteria should ensure they are spending 2% of net profits on CSR, or face monetary penalties.
- The new rules introduced by the government in January 2021 provide more flexibility for companies to spend on CSR, but also come with penalties for non-compliance.
