The ministry of corporate affairs has proposed a few key changes in corporate social responsibility (CSR) rules, including a hike in the cap for “administrative expenses” incurred by the companies under CSR function to 10% from 5% now. As part of a set of recommendations made to the finance ministry ahead of the Budget 2024-25, the MCA also sought longer timeline for completion of projects taken up under CSR.
Currently, “ongoing projects” are defined under the CSR obligations as those with duration of up to three years, but industry feels since many large projects practically take more years to make a meaningful impact, the project tenures should be longer.
“The current timeline of 3 years for ongoing projects is not justified for the corporates to take up large multi-year projects. The relaxations in CSR could be announced in the Budget and changes in the rules may follow,” said an official.
Then MCA has also proposed strengthening of the National Company Law Tribunal (NCLT) infrastructure and revamp of the MCA21 portal. “The NCLT infrastructure is not adequate to handle the growing number of cases. More benches are required in places where the bench is handling cases from multiple states. At present, just 15 benches are operating under NCLT. These benches are handling cases worth crores but lack basic facilities,” said an official source.
The MCA’s proposal also aligns with its target to increase the member strength at NCLT from current 47 to the sanctioned strength of 63. “Some vacancies have been reported in the first week of July due to retirement of members. Though the interviews have taken place to fill these vacancies, the increased strength would still be insufficient considering the volume and the number of pending cases,” said G.P. Madaan, adjunct professor at Indian Institute of Corporate Affairs (IICA).
“The company law matters have taken a backseat. Normal and M&A (merger and acquisition)-related approvals are taking much longer than expected which is against the spirit of ease of doing business,” said Sameet Gambhir, co-chair (corporate affairs committee) at PHDCCI.
The official said that the other input from MCA in the Budget include more funds to revamp the MCA21 portal. Even though the ministry is rolling out the new format (version 3) in phases, the professionals have been reporting frequent glitches in the portal while doing corporate filings. “The portal, which is being managed by Infosys, is consuming a plenty of time in the filing of documents so there’s a need to relook at it,” the official said. MCA continues to operate version 2 and version 3 for different sets of form filings.
In the Interim Budget 2024-25, the MCA was allocated Rs 667.06 crore, which was lower than the budgeted expenditure of Rs 756.19 crore outlined in 2023-24.