New Mandate For CSR Reporting - CSR-2 Form

Wondering what is CSR-2 Form? It is a comprehensive report on Company's CSR activities in detailed manner. Companies in India have been mandated to submit a comprehensive report on their corporate social responsibility (CSR) activities in a new form CSR-2. This is applicable from 2022 onwards whereby the companies would be required to submit CSR-2 (New CSR Form) to the Registrar of Companies for the financial year 2020-21 before the end of March 2022. This is implemented through the Companies (Accounts) Amendment Rules, 2022 dated February 11th 2022.

What is CSR-2 Form?

The Ministry of Corporate Affairs has notified that every company covered under the provisions of sub-section (1) to section 135 shall furnish a report on Corporate Social Responsibility in Form CSR-2 to the Registrar for the preceding financial year (2020-2021) and onwards as an addendum to Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be.

Highlights of details to be included in CSR-2 are as follows:

• Reporting about the constitution of the company’s CSR committee, its meetings, as well the disclosure of details of the CSR committee.
• Details relating to the capital assets if created or acquired through CSR expenditure.
• Details of CSR policy, and approved CSR projects on the company’s website.q
• Details of the company’s CSR project investments and the CSR funds that have gone unspent.
• Details about the impact assessment of CSR projects (as per the Companies (CSR Policy) Rules, 2014).
• Whether or not impact assessment of CSR projects is done as per Companies (CSR Policy) Rules, 2014.

Such reporting as per the new form is more comprehensive, increasing the burden of compliance on the companies. However, it would enable the Indian government to increase further accountability and transparency by the companies.

This is a positive step, especially if the government is considering the National CSR Policy which would require a robust database to analyze the trends and process of CSR spending and outcomes to make businesses socially accountable in line with the country's developmental needs. The CSR-2 form will help collate the data and statistics needed for this.

CSR has evolved from a voluntary and public-spirited concept to a mandatory exercise for staying compliant. The rationale for the new mandate is in the context of preventing and forewarning companies from re-financing CSR money back into their business accounts through money laundering. The compliance is made more stringent and is more detailed in the form and manner of reporting than earlier.

There are criticisms of repetition of disclosures made in the Director’s Report relating to CSR (which is already a part of the company’s annual report), thereby increasing the time and cost of filing compliance, especially when the Government is pushing for ease of doing business. Yet, this new mandate is a step in the right direction as it would help in better compliance monitoring furthering the spirit of social responsibilities by the companies.

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