CORPORATE SOCIAL RESPONSIBILITY
Definitions relevant to Corporate Social Responsibility
Corporate Social Responsibility (CSR) means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:
(i) activities undertaken in pursuance of normal course of business of the company:
Provided 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, 2022-23 subject to the conditions that-
(a) 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.
(b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report.
(ii) any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level.
(iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act.
(iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019).
Section 2 (K) = “Employee” means, any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union;
(v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services.
(vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India.
| Applicability of CSR | Every Company having net worth 500 crore or more
Turnover of rupees 1000 crore or more Net profit of rupees 5 crore or more (Immediately preceding financial year) How much to be spent? At least 2 % of average net profit of the company made during the 3 immediately preceding financial years In case of new company or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years. Net Profit should be calculated as per section 198 of Companies Act, 2013 |
| CSR Committee | 3 or more directors, out of which at least 1 director should be Independent Director
If there is no Independent Director, then 2 or more director When CSR Committee not applicable- Where the amount to be spent by a company under sub-section (5) does not exceed 50 lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company. Functions of CSR Committee- The CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR Policy, which shall include the following, namely: – (a) the list of CSR projects or programmes that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act. (b) the manner of execution of such projects or programmes as specified in sub-rule (1) of rule 4. (c) the modalities of utilisation of funds and implementation schedules for the projects or programmes. (d) monitoring and reporting mechanism for the projects or programmes; and (e) details of need and impact assessment, if any, for the projects undertaken by the company: Provided that Board may alter such plan at any time during the financial year, as per the recommendation of its CSR Committee, based on the reasonable justification to that effect. |
| Website | The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access. |
| Areas to be preferred | Local Area and areas around it where it operates |
| CSR Expenditure | The board shall ensure that the administrative overheads shall not exceed 5 % 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 6 months of the expiry of the financial year. What if company spends more than required amount? 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 – (i) 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. (ii) the Board of the company shall pass a resolution to that effect. Whether company spent CSR amount for creation of acquisition of capital assets? The CSR amount may be spent by a company for creation or acquisition of a capital asset, which shall be held by – (a) 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 (b) beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or (c) 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 180 days from such commencement comply with the requirement of this rule, which may be extended by a further period of not more than 90 days with the approval of the Board based on reasonable justification. |
|
What if CSR amount not spend on time? |
Board will specify the reason for not spending the amount and, unless the unspent amount relates to any ongoing project referred to in sub-section (6)
Transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year |
|
What if no amount spent in ongoing project |
“Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of its CSR obligation having timelines not exceeding 3 years excluding the financial year in which it was commenced and shall include such project that was initially not approved as a multi-year project but whose duration has been extended beyond 1 year by the board based on reasonable justification.
Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, shall be transferred by the company within a period of 30 days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of 3 financial years from the date of such transfer, failing which, Company shall transfer the same to a Fund specified in Schedule VII, within a period of 30 days from the date of completion of the third financial year. |
| What if spend more than amount to be spent | If spend more than required then can set off such excess amount against the requirement to spend under this sub-section for such number of succeeding financial years and in such manner, as may be prescribed. |
| Penalty | Company shall be liable to penalty of twice the amount required to be transferred by the company to the fund or the unspent CSR or 1 crore rupees
Whichever is less Every officer of the company who is in default shall be liable to a penalty of 1/10th of the amount required to be transferred by the company to such fund or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less. |
| CSR Implementation | CSR activity shall be done by company itself or through
(a) Company established under Section 8 of the Act or a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961 (43 of 1961), 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 (c) any entity established under an Act of Parliament or a State legislature. “entity” shall mean a statutory body constituted under an Act of Parliament or State legislature to undertake activities covered in Schedule VII of the Act. or (d) a company established under section 8 of the Act, or a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961, and having an established track record of at least 3 years in undertaking similar activities. |
|
CSR Reporting |
(1) The Board’s Report of a company covered under these rules pertaining to any financial year shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable. (2) In case of a foreign company, the balance sheet filed under clause (b) of sub-section (1) of section 381 of the Act, shall contain an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable. (3) (a) Every company having average CSR obligation of 10 crore rupees or more in pursuance of subsection (5) of section 135 of the Act, in the 3 immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of 1 crore rupees or more, and which have been completed not less than one year before undertaking the impact study. (b) The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR. (c) A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed 2% of the total CSR expenditure for that financial year or 50 lakh rupees, whichever is higher.] |
| CSR-1 | (a) Every entity, covered under sub-rule (1), who intends to undertake any CSR activity, shall register itself with the Central Government by filing the form CSR-1 electronically with the Registrar, with effect from the 01st day of April 2021:
Provided that the provisions of this sub-rule shall not affect the CSR, projects or programmes approved prior to the 01st day of April 2021. Form CSR-1 shall be signed and submitted electronically by the entity and 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. |
| Others | A company may engage international organisations for designing, monitoring and evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity building of their own personnel for CSR.
A company may also collaborate with other companies for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programmes in accordance with these rules. The Board of a company shall satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect. In case of ongoing project, the Board of a Company shall monitor the implementation of the project with reference to the approved timelines and year wise allocation and shall be competent to make modifications, if any, for smooth implementation of the project within the overall permissible time period. |
|
CSR-2 (e-form) |
Sub-rule (1B) of Rule 12 of Companies (Accounts) Rules, 2014
Every company covered under the provisions of sub-section (1) to section 135 shall furnish a report on Corporate Social Responsibility in Form CSR-2 to the Registrar for the preceding year (2020-2021) and onwards as an addendum to form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be. Purpose of the e-form Corporate Social Responsibility is a means by which company seeks to give back to the society and integrate social and environmental concerns in their business operations and interactions with their stakeholders In accordance with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020, company can undertake CSR activities either itself or through entities defined under Rule 4 sub rule (1). The web-form Addendum to AoC-4 CSR shall be filed as an independent form for FY 20-21 and onwards by all the companies that are required to carry out CSR activities as per the relevant rules or are voluntarily carrying out CSR activities. |
Author Bio
