Indian government has well intertwined the Companies’ Corporate Social Responsibility Policy and Rules, with public welfare and to the benefit of the common people in whole. In the present covid scenario, there have been various amendments in the CSR Policy, from time  to time, to fit  the pandemic situation. It is appreciable that many companies have come forward and helped the needy in these tough times and accordingly some more activities were added to the list of CSR activities.  Below are the  highlights of the recent amendments made in the CSR Rules to provide a holistic view of the CSR to the readers.

Highlights on Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 :

CSR Implementation:

  • Every entity, covered under sub-rule (1) Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, which intends to undertake any CSR  activity should register with Ministry of Corporate Affairs.
  • Entity shall register itself by filing the form CSR-1 electronically with the Registrar, with effect from the 01st day of April 2021, provided that this requirement is not applicable to the CSR projects or programmes approved prior to the 01st  day of April 2021.
  • Form CSR-1 shall be verified digitally by a Chartered Accountant in practice or a Company Secretary in practice or a Cost Accountant in practice.
  • On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically.

CSR Expenditure:

  • The Board shall ensure that the administrative overheads shall not exceed five percent of total CSR expenditure of the company for the financial year.
  • Any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be ploughed back into the same project or shall be transferred to the ‘Unspent CSR Account’ and spent in pursuance of CSR policy and annual action plan of the company or transfer such surplus amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.
  • Where a company spends an amount in excess of requirement provided under sub-section (5) of section 135 , such excess amount may be set off against the requirement to spend under sub-section (5) of section 135 up to immediate succeeding three financial years subject to the conditions that –
    • the excess amount available for set off shall not include the surplus arising out of the CSR activities, if any, in pursuance of sub-rule (2) of this rule.
    • the Board of the company shall pass a resolution to that effect.
  • The CSR amount may be spent by a company for creation or acquisition of a capital asset, which shall be held by –
    • a company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR Registration Number under sub-rule (2) of rule 4; or
    • beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or
    • a public authority:

Provided that any capital asset created by a company prior to the commencement of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, shall within a period of one hundred and eighty days from such commencement comply with the requirement of this rule, which may be extended by a further period of not more than ninety days with the approval of the Board based on reasonable justification.”.

CSR Reporting:

  • Every Company covered under the said Rules,  shall include  an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable.
  • In case of Foreign company, Balance sheet filed under  Clause (b) of Sub-section(1) of Sec 381 of Companies Act, 2013 shall contain an annual report on CSR containing particulars specified  in Annexure I or Annexure II, as applicable.
  • Every company having average CSR obligation of ten crore rupees or more in pursuance of subsection (5) of section 135 of the Act, in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.
  • The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.
  • A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less. ”.

Clarification on spending of CSR Funds by MCA:

  • General Circular dated 13.01.2021
    • In continuation to the Ministry’s General Circular No. 10/2020 dated 23.03.2020 wherein it clarified that spending of CSR funds for COVID-19 is eligible CSR Activity, it is further clarified that spending of CSR funds for carrying out awareness campaigns/programmes or public outreach campaigns on COVID -19 Vaccination programme is an eligible CSR activity under item no. (i), (ii) and (xiii) of Schedule VII of the Companies Act, 2013 relating to promotion of health care, including preventive healthcare and sanitization, promoting education, and disaster management respectively.
  • General Circular dated 22.04.2021
    • In continuation to this Ministry’s General Circular No. 10/2020 dated 2303.2020 wherein it clarified that spending of CSR funds for COVID-19 is eligible CSR Activity, it is further clarified that spending of CSR funds for ‘ setting up makeshift hospitals and temporary COVID Care facilities’ is an eligible CSR activity under item no. (i) and (xii) of Schedule VII of the Companies Act, 2013 relating to promotion of health care, including preventive healthcare and disaster management respectively.
  • General Circular dated 05.05.2021
    • In continuation to the Ministry’s General Circular No. 10/2020 dated 23.03.2020 wherein it clarified that spending of CSR funds for COVID-19 is eligible CSR Activity, it is further clarified that spending of CSR funds for ‘creating health infrastructure for COVID care’, ‘establishment of medical oxygen generation and storage plants’, ‘manufacturing and supply Oxygen concentrators, ventilators, cylinders and other medical equipment for countering COVID-19’ or similar such activities are eligible CSR activity under item no. (i) and (xii) of Schedule VII of the Companies Act, 2013 relating to promotion of health care, including preventive healthcare and, disaster management respectively.
    • Reference is also drawn to item no (ix)  of Schedule VII of the Companies Act, 2013 which permits contribution to specified research and development projects as well as contribution to public funded universities and certain Organisations  engaged in conducting research in science, technology, engineering, and medicine  as eligible CSR activities.
  • General Circular dated 20.05.2021
    • Keeping in view the spread of COVID-19 in India, an appeal dated 30.03.2020 was made to MDs/CEOs of top 1000 companies in terms of market capitalization, to contribute generously to “Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund” (PM CARES Fund). In the appeal, it was mentioned that such contribution may, inter-alia, include the unspent CSR amount, if any, and an amount over and above the minimum prescribed CSR amount for FY 2019-20, which can later be offset against the CSR obligation arising in subsequent financial years. The said appeal was uploaded on the website of the Ministry and sent to e-mails of the aforementioned corporates on 31.03.2020.
    • In pursuance to the said appeal, certain companies claimed to have contributed CSR funds to the ‘PM CARES Fund’ over and above their prescribed CSR amount for FY 2019-20. Several representations have been received in the Ministry for setting off the excess CSR amount spent by the companies in FY 2019-20 by way of contribution to ‘PM CARES Fund’ against the mandatory CSR obligation for FY 2020-21.
    • The issues raised in the said representations have been examined in the Ministry and accordingly, it is hereby clarified that where a company has contributed any amount to ‘PM CARES Fund’ on 31.03.2020, which is over and above the minimum amount as prescribed under section 135(5) of the Companies Act, 2013 (“Act”) for FY 2019-20, and such excess amount or part thereof is offset against the requirement to spend under section 135(5) for FY 2020-21 in terms of the aforementioned appeal, then the same shall not be viewed as a violation subject to the conditions that:
      • the amount offset as such shall have factored the unspent CSR amount for previous financial years, if any;
      • the Chief Financial Officer shall certify that the contribution to “PM-CARES Fund” was indeed made on 31st March 2020 in pursuance of the appeal and the same shall also be so certified by the statutory auditor of the company; and
      • the details of such contribution shall be disclosed separately in the Annual Report on CSR as well as in the Board’s Report for FY 2020-21 in terms of section 134 (3) (o) of the Act.

Conclusion:

The COVID -19 pandemic has already affected India since the last one year, wherein various sectors have been drastically affected by the lockdown and shutting down of organisations leading to incurring of huge losses and the most saddening part is the loss of loved ones and people. Though the situation cannot be changed or reversed, one can be of support to each other in these tough times. The entities that are in a good position among these drawbacks of the pandemic, should voluntarily come forward and take initiatives for public welfare and aid a helping hand to the needy, as the medical facilities are in acute shortage and the cost of the treatment is also not affordable to all. These amendments are encouraging corporates to plan with CSR activity towards the most sought for Covid-19 related measures. We hope and wish that we shall together overcome this pandemic situation in the near future with unity and solidarity.


(This article represents the views of the authors only and does not intent to give any kind of legal opinion on any matter)

Authors – CS Jaya Bharati K & CS Vinodini P Rao
(can be reached at jbkarumuri@gmail.com)

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