CSR spending on Covid Activities – Regulatory Announcements

Section 135(1) of the Companies Act,2013 mandates that

1. Every Company, its holding Company, its subsidiary Company

2. Foreign Company having branch office or project office in India

having net worth of INR 500 Crore or more, turnover of INR 1000 Crore or more, or a net profit of INR 5 crore or more during the immediately preceding financial year shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, or where the company has not completed the period of three financial years since its incorporation, the average net profits shall be calculated for the financial year since its incorporation. Activities which may be included by companies in their CSR spending are listed in schedule VII of the companies Act, 2013. With pandemic unfolding and resources running scares, government has issued various clarifications to clarify that funds spent on covid relief is eligible as CSR activity.

Following is the summary of regulatory announcements regarding CSR Spending for COVID relief activities:

Circular No 10/2020 dated 23^rd March 2020

MCA Clarified the following:

Funds spent on COVID-19 management would be treated as eligible CSR Activity.

CSR funds can be spent by the companies for various activities covered under item nos. (i) and (xii) of Schedule VII relating to promotion of health care, including preventive health care and sanitation, and, disaster management.

MCA further clarified that items under schedule VII are broad based and shall be interpreted liberally in the wake of crisis.

Office Memorandum dated 28^th March 2020

MCA has clarified that all donations and contributions to the PM-CARES Fund will be counted and listed as a permissible CSR activity.

Notification no GSR 526(E) dated 24^th August 2020

MCA has amended Companies (CSR Rules) 2014 to provide that that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22 and 2022-23 subject to the conditions that-

(i) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act.

(ii) details of such activity shall be disclosed separately in the Annual Report on CSR included in the Board’s Report”.

Circular No 01/2021 dated 13^th January 2021

MCA has 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.

Circular No 05/2021 dated 22^nd April 2021

MCA has clarified that, spending of CSR funds for setting up makeshift hospitals and temporary COVID-Care facilities is an eligible CSR Activity.

Circular No 09/2021 dated 5th May 2021

MCA has clarified that spending of CSR funds for creating health infrastructure for COVID-Care, establishments of medical oxygen generation and storage plants, manufacturing and supply of Oxygen concentrators, ventilators, cylinders and other medical equipment for countering COVID-19’ or similar such activities are eligible CSR activities.

Circular No 13/2021 dated 30^th July 2021

MCA has clarified spending of CSR funds for COVID-19 vaccination for persons other than the employees and their families, is an eligible CSR activity.