Companies (Accounts) Second Amendment Rules 2023
Companies (Accounts) Second Amendment Rules 2023
On June 2, 2023, the Ministry of Corporate Affairs (MCA) issued the Companies (Accounts) Second Amendment Rules, 2023, which amend the Companies (Accounts) Rules, 2014. These provisions became effective on June 2, 2023. Rule 12 of the Companies (Accounts), 2014, has been amended. The amendment specifies that for the financial year 2022-2023, a separate filing of Form CSR-2 is required by the March 31, 2024 deadline. This filing of Form CSR-2 should be done after submitting Form No. AOC-4/Form No. AOC-4-NBFC (Ind AS)/Form No. AOC-4 XBRL, depending on the applicable case.
MCA Form CSR-2
To promote good corporate governance practices, the Ministry of Corporate Affairs (MCA) vide a notification on February 11, 2022, introduced the Form CSR-2. This form is required for companies to provide details of their Corporate Social Responsibility (CSR) expenditure to the MCA. Companies falling under Section 135 of the Companies Act 2013, which mandates CSR compliance, must allocate a certain percentage of their profits toward CSR activities.
Applicability of Form CSR-2
As mentioned above, Form CSR-2, also known as the Report on Corporate Social Responsibility, must be filed by entities falling under the provisions of Section 135. This includes companies that must comply with CSR regulations outlined in the Companies Act 2013.
Reporting CSR Activities
Previously, there was no prescribed form for reporting CSR activities. Section 135 only required companies to include CSR details in their Board Reports and disclose them on their websites if applicable. However, in 2022, MCA introduced Form CSR-2, which companies must file in addition to Form AOC-4 for submitting their financial statements to the Registrar of Companies.
The complete 11-page Form CSR-2 requires companies to provide the following information:
- Details of CSR expenditure for the past three financial years and ongoing projects.
- CSR Committee details.
- Disclosure of CSR activities on the company’s website as per Rule 9 of Companies (CSR Policy) Rules, 2014.
- Net profit and other relevant information for the preceding financial years.
If any capital assets were acquired or created through CSR expenditure, companies must provide details such as the property’s address, location, pin code, the amount spent, and registered owner.
Deadline for Filing CSR-2
As per the Companies (Accounts) Second Amendment Rules 2023, the MCA has stipulated that Form CSR-2 should be filed separately on or before March 31, 2024, for the preceding financial year (2022-2023). This filing deadline applies after filing Form AOC-4, AOC-4 XBRL, or AOC-4 NBFC (Ind AS).
To summarize the due dates for Form CSR-2:
- For the financial year 2022-23, Form CSR-2 should be filed separately on or before March 31, 2024.
- From the financial year 2022-23 onwards, Form CSR-2 should be filed as an addendum to Form AOC-4 (due date of AOC-4).
Important Provisions Dealt With In the Companies (Accounts) Second Amendment Rules 2023
The Companies (Accounts) Second Amendment Rules 2023 address several essential provisions. Here are some key provisions covered by these rules:
Section 128(1) – Maintenance of Books of Account and Financial Statements
Section 128(1) of the Companies Act 2013 mandates every company to create and maintain books of account, relevant documents, and financial statements at its registered office. These records should accurately represent the company’s state of affairs, including its branch offices, and explain the transactions conducted at both the registered office and branches. The books must be maintained using the accrual basis and the double entry system. Suppose the Board of Directors decides to keep these records at a location other than the registered office. In that case, a written notice must be filed with the Registrar within seven days, providing the complete address of the additional location. Additionally, companies may maintain electronic versions of these records in compliance with applicable regulations.
Section 128(3) – Director’s Right to Inspect Books of Account and Records
Section 128(3) of the Companies Act 2013 grants directors the right to inspect the books of account and other records the company keeps within India during business hours at the registered office or any other location in India. If any financial records are maintained outside of India, copies must be kept and made available for inspection by directors, subject to any prescribed conditions. However, only the designated person authorized by a resolution passed by the Board of Directors can examine the financial records of any subsidiary company.
Section 129(3) – Preparation of Consolidated Financial Statements and Supplementary Statements”
Section 129(3) of the Companies Act 2013 requires companies with subsidiaries or associate companies to prepare consolidated financial statements following applicable accounting standards. These statements must be presented as its financial statements at the company’s annual general meeting. Additionally, the company must provide a supplementary statement summarizing the key elements of the financial statements of its subsidiary and associated companies, as required. The Central Government has the authority to make provisions for consolidating company accounts based on relevant regulations.
Authority to Prescribe Accounting Standards under Section 133 of the Companies Act, 2013
Section 133 of the Companies Act, 2013 Following the authority granted by section 133 of the Companies Act, 2013, the Central Government, after consultation with and examination by the National Financial Reporting Authority, has the power to prescribe accounting standards or any supplements as recommended by the Institute of Chartered Accountants of India (ICAI). The ICAI was established under section 3 of the Chartered Accountants Act 1949.
Filing Requirements and Procedures under Section 134 of the Companies Act, 2013
Section 134 of the Companies Act 2013 Section 134 pertains to the filing of significant reports and papers by corporations, including financial statements, board reports, and descriptions of directors’ responsibilities. This section outlines the process for authorizing financial statements, stating that the Board of Directors must approve them before the directors can sign them. Additionally, it requires attaching the auditor’s report and including a board report. The section also lists materials that must be included in the report.
Corporate Social Responsibility (CSR) Obligations under Section 135(4) of the Companies Act, 2013
Section 135(4) of the Companies Act, 2013 Under Section 135(4), every company mentioned in subsection (1) is required to have a Board of Directors that: (a) Adopts the company’s corporate social responsibility (CSR) policy after considering the recommendations made by the corporate social responsibility committee. The contents of the policy must be disclosed in the company’s report and, if applicable, posted on the company’s website as required. (b) Ensures that the company carries out the initiatives listed in its CSR policy.
Submission of Audited Financial Statements under Section 137 of the Companies Act, 2013
Section 137 of the Companies Act, 2013 According to Section 137 of the Companies Act, 2013, companies are obligated to submit their audited financial statements for 2013 within 30 days of the company’s Annual General Meeting. This submission must be made using Form AOC-4. Different forms may be required for various classes of corporations.
Appointment of Internal Auditor under Section 138 of the Companies Act, 2013
Section 138 of the Companies Act, 2013 Section 138(1) grants the power to prescribe to any class of companies that may be required to appoint an internal auditor for conducting an internal audit of the company’s functions and activities. The internal auditor may be a chartered accountant, cost accountant, or another professional, as the Board determines.
The official notification about Companies (Accounts) Second Amendment Rules 2023 is attached here:
Companies (Accounts) Second Amendment Rules 2023