CS Divyanshu Sahni

CS Divyanshu Sahni

Analysis of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2016

Introduction

Ministry of Corporate Affairs (‘MCA’), on the 23rd of May, 2016 came up with the Companies (Corporate Social Responsibility) Amendment Rules, 2016, with the intent to simplify the language complexity under the earlier Companies (Corporate Social Responsibility) Rules, 2014.

The change is specifically focused on Rule 4 (2) of the Companies (Corporate Social Responsibility) Rules, 2014, dealing with Corporate Social Responsibility Activities (‘CSR Activities’). It prima facie deals with the means through which the company can carry out its CSR Activities.

Effective date: The notification is effective from May 23, 2016.

The comparative analysis of the amendment has been presented in a tabular format below:

The parts in bold in the table above represent the change from what was there in the earlier provisions to what has been brought in the new provisions.

Companies (Corporate Social Responsibility) Rules, 2014

[Earlier Provisions]

Companies (Corporate Social Responsibility) Amendment Rules, 2016

               [New Provisions]

      Analysis
The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through a registered trust or a registered society or a company established under section 8 of the Act by the Company, either singly or along with its holding or subsidiary or associate company, or along with any other company or holding or subsidiary or associate company of such other company, or otherwise.

Provided that-

(i)    if such trust, society or company is not established by the company, either singly or along with its holding or subsidiary or associate company, or along with any other company or holding or subsidiary or associate company of such other company, shall have an established track record of three years in undertaking similar programs or projects;

ii) The company has specified the project or programs to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism.

The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through

(a) a company established under section 8 of the Act or a registered trust or a registered society, established by the company, either singly or along with any other company, or

(b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government or any entity established under an Act of Parliament or a State legislature:

Provided that- if, the Board of a company decides to undertake its CSR activities through a company established under section 8 of the Act or a registered trust or a registered society, other than those specified in this sub-rule, such company or trust or society shall have an established track record of three years in undertaking similar programs or projects; and the company has specified the projects or programs to be undertaken, the modalities of utilisation of funds of such projects and programs and the monitoring and reporting mechanism.

The language under the new provisions have only been simplified for a better understanding of the same. Earlier provisions used a long phrase to explain that the companies can carry out their CSR activities through its group companies like holding, subsidiary, associate, or step down holding or subsidiary, etc. The new provisions have simply mentioned ‘with any other companywhich also covers the same intent as before.

The only addition under the new provisions is with regard to the medium through which CSR activities can be carried out.

Under the new provisions, companies can also carry out their CSR activities through section 8 companies, trusts or societies established by the Central or State Government or an entity established under an Act of Parliament or a State Legislature. The requirement of having an established track record of three years in similar activities will not be required to be checked if the companies carry out their CSR activities through these entities.

Keeping the above the rest of the provisions are similar to the earlier provisions in this regard.

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Category : Company Law (2996)
Type : Articles (10773)