Applicability of Corporate Social Responsibility (CSR)
Every company having
- a net worth of INR 5 billion or more, or
- turnover of INR 10 billion or more, or
- a net profit of INR 50 million or more
during the immediately preceding financial year, shall spend 2% of its average net profit made during the 3 immediately preceding financial years on CSR activities.
New Provisions
The Ministry of Corporate Affairs (MCA), vide its circular dated 11 February 2022, has now mandated all such companies to furnish a comprehensive report on their CSR activities in Form CSR-2 having details of CSR spending, quantum of CSR money unspent/carry forward, details of all ongoing CSR projects, creation or acquisition capital assets through CSR spend, details relating to their CSR Committee, CSR policy, etc.
Filing Requirements
For FY 2020-21, companies shall file Form CSR-2 on or before 31 March 2022.
For FY 2021-22 and onwards, the Form CSR-2 shall be filed as an addendum to Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be.
Our Comments
The requirement of this reporting would surely enhance the transparency and disclosures of CSR activities. The data collected through these forms could come in handy for the MCA's CSR department to undertake data mining and analytics for surveilling CSR frauds and drafting effective policies for CSR. However, it is likely to add some compliance burden on corporates and may not align with the government's vision of promoting ease of doing business in India.
We believe that the action taken by MCA is effective; however, MCA should take efforts to acquire maximum information with minimum increase in compliances as most of the disclosures asked in Form CSR-2 are already being given by the Corporates in their Directors Report.
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