MCA Tightens Oversight on CSR Compliance for Corporate India
The Ministry of Corporate Affairs (MCA) has tightened its oversight on corporate India’s Corporate Social Responsibility (CSR) compliance by shortening the window for filing the CSR return with the government. Corporates are now mandated to file their CSR return (CSR-2) for the financial year 2023-24 by December 31, 2024. This filing must be done independently, separate from AOC-4, which is the annual return form that companies must submit within 30 days of their Annual General Meeting (AGM).
For the previous fiscal year, 2022-23, corporates had the flexibility to file the CSR return (CSR-2) until March 31, 2024. However, the new timeline reflects a stricter approach by the MCA to enhance compliance.
Company law experts have pointed out inconsistencies where CSR numbers declared in financial statements (within AOC-4) do not align with the figures reported in the CSR return (CSR-2). Anjali Jain, Partner at Areness, a law firm, mentioned that this MCA notification will assist the regulator in analyzing and assessing such discrepancies, particularly benefiting from a reduced compliance window.
Manmeet Kaur, Partner at Karanjawala & Co, emphasized that the requirement for standalone CSR filing would enhance transparency and accuracy concerning CSR activities, as companies will need to maintain separate records for both AOC-4 and CSR-2 filings. Kaur also noted that amendments made to the Companies (Accounts) Rules in 2022 mandated CSR-2 to be filed as an addendum to AOC-4, a process that was revised in 2023. Now, a distinct CSR-2 filing must occur after the AOC-4 submission for FY22-23, no later than March 31, 2024.
The latest amendment introduces a separate filing requirement for form CSR-2 for FY23-24, which must occur after the AOC-4 filing and before December 31, 2024, Kaur added.
Vanita Bhargava, Partner at Khaitan & Co, explained that Form CSR-2 was initially introduced in 2022, requiring companies to report detailed information regarding their CSR initiatives, including project details, CSR committee structure, CSR spending, and any unspent CSR funds.
“The latest MCA notification ensures transparency and creates a mechanism to ascertain whether companies are meeting their regulatory obligations regarding CSR,” stated Bhargava. “This move by the MCA appears to align with the originally intended timeline for submitting Form CSR-2, which is to occur within 30 days of the company’s AGM, in conjunction with Form AOC-4.”
As corporate India adapts to these new regulations, the focus on CSR compliance is set to increase, promoting greater accountability and transparency in CSR activities across the board.
