Brief note on the proposed amendments in the Companies (Corporate Social Responsibility Policy) Rules, 2014 (CSR Rules) as proposed vide Draft Companies (CSR Policy) Amendment Rules, 2020:

1. Newly phrased definitions under the CSR Rules:

a) ‘Corporate Social Responsibility’ defined with a negative list. Some of the exclusions like normal course were already there but now it has been specifically stated that CSR activities shall exclude the following:

i) Activities undertaken in pursuance of normal course of business of the company.

ii) Any activity undertaken by the company outside India.

iii) Contribution of any amount directly or indirectly to any political party under section 182 of the Act.

iv) Activities that significantly benefit the employees of the company and their families. (Employees can be beneficiary only upto 25 % of the CSR activity)

b) CSR Policy has be re-defined, it shall means a statement containing the approach and direction given by the Board of Directors of the Company, upon the recommendation of the CSR Committee of the Board, for selection, implementation and monitoring of activities to be undertaken in areas or subjects specified in Schedule VII of the Companies Act, 2013 (“the Act”).

c) Definition of “International Organization” has been substituted in clause (f) of the CSR Rules- which means an organization notified by the Central Government as an international organization under section 3 of the United Nations (Privileges and immunities) Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act shall apply.

d) Definition of the Net worth has been inserted in clause (g) – this is same as earlier. However, as per the FAQs available at MCA website- for the purpose of Computation of Net profit for Section 135 is as per Section 198 of the Act, which is Profit before Tax.

e) Definition of “Ongoing Projects” has been inserted- which means a multi-year project with a timelines not exceeding three years excluding the financial year in which it was commenced, and shall also include such projects that were initially not approved as a multi-year project but whose duration has been extended beyond a year by the Board based on reasonable justification.

f) Public Authority means a public authority as defined under Right to Information Act, 2005.

2. Exemption has been given to those Companies who ceases to be a company covered under subsection (1) of section 135 of the Act for three consecutive financial years- from the entire Section 135.

3. The entire Rule 4 of the CSR Rule shall be substituted, which states as under:

a) The CSR activities shall be undertaken by the Company by itself or through:

1. a company incorporated under Section 8 of the Act, or

2. any entity established under an Act of Parliament or a State legislature.

The aforesaid Companies, shall be required to register itself with the Central Government for undertaking any CSR activity by filing the e-Form CSR-1 with the Registrar along with the prescribed fees. Thereby, prohibiting to incur CSR expenditure through un incorporated CSR foundation.

However, the provisions of this sub-rule shall not affect the CSR projects or programmes that were approved prior to the commencement of the Companies (CSR Policy) Amendment Rules, 2020.

b) 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.

c) A company may engage international organizations– for designing, monitoring, evaluation of the CSR projects / programmes or for capacity building of their own personnel for CSR or for implementation of a CSR project subject to prior approval of the central government.

d) The Board to satisfy itself that the find so disbursed have been utilized for the purpose and in the manner as approved by it. The CFO shall certify the same.

e) The ongoing projects, needs to be monitored by the Board for the smooth implementation of the project with reference to the approved timelines and year wise allocation

4. In sub rule (2) of Rule 5 of the CSR Rules, the following shall be substituted:

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:

(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;

(c) the modalities of utilization of funds and implementation schedules for the projects or programmes; and

(d) monitoring and reporting mechanism for the projects or programmes.

(e) Details of need and impact assessment, if any, undertaken by the company.

5. The Rule 6 of The CSR Rules relating to CSR Policy- shall be omitted

6. The entire Rule 7 of the CSR Rule shall be substituted, which states as under:

a. The Board shall ensure that the administrative overheads incurred in CSR expenditure (for the activities included in the CSR policy of the Company), shall not exceed 5% of the total CSR expenditure of the Company for the F.Y.

The Companies who have conducted impact assessment (refer Rule 8(3)-impact assessment is required to be conducted by the Companies whose obligation of spending average CSR expenditure exceeds Rs. 5 Crore or more in 3 preceding F.Y.), may incur administrative overheads not exceeding 10% of the total CSR expenditure.

b. Surplus arising out of the CSR projects or programmes or activities shall not form part of the business profit of a company. It 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 action plan of the company.

c. The CSR amount spent by the Company towards creation / acquisition of Assets, shall only be held in the name of the Section 8 Company having charitable objects or public authority.

Any assets created by the Company prior to the commencement of these Rules, shall within a period of 180 days from the date of such commencement, comply with these Rules which may further be extended by a period of 90 days by the approval of the Board, based on the reasonable justification.

d. Unspent balance, if any, towards fulfilment of CSR obligation (except if retained for ongoing CSR projects) at the time of commencement of these Rules shall be transferred within a period of 30 days from the end of Financial Year 2020-21 to special account viz., ‘Unspent Corporate Social Responsibility Account’ opened by the company 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 F.Y. from the date of such transfer, failing which, the company shall transfer the same to a National Fund/ any funds as mentioned in Schedule VII of the Act, within a period of 30 days from the date of completion of the third financial year.

7. In Rule 8 of CSR Rules, sub rule 3 has been inserted which stated that:

A company having the obligation of spending average CSR amount of Rs 5 Crore or more in the three immediately preceding financial years in pursuance of sub section 5 of Section 135 of the Act, shall undertake impact assessment for their CSR projects or programmes, and shall disclose details of the same in its Annual Report on CSR.

Thereby requiring the said Companies to conduct a mandatory impact assessment for their CSR projects or programmes.

8. In new Rule 9 (“requirement of Website Disclosures”)of the CSR Rules shall be substituted:

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 for public viewing, as per the particulars specified in the Annexure-1.

9. Newly inserted Rule 10 of CSR Rules, which states as:

a) The Central Government shall establish a fund called the “National Unspent Corporate Social Responsibility Fund” (“the National Fund/ the fund”) for the purposes of sub-section (5) and (6) of section 135 of the Act. The Fund shall be utilized for the purposes of undertaking CSR projects in the in areas or subjects specified in schedule VII of the Act.

Provided that until such fund is created the unspent CSR amount in terms of provisions of sub-section (5) and (6) of section 135 of the Act shall be transferred by the company to any fund as specified in schedule VII of the Act.

b) The manner of administration, authority for administration of the Fund shall be in accordance with such guidelines as may be prescribed by the Central Government from time to time.”

##Public comments, if any, are solicited on the draft Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 by end of business hours on 28th March, 2020.

For “format for the annual report on CSR activities to be included in the Board’s Report “, the following format shall be substituted, namely:-

ANNEXURE

FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE
INCLUDED IN THE BOARD’S REPORT

1. CSR Policy of the Company

2. Composition of CSR Committee:

S. No. Name of Director DIN Designation / Nature of Directorship No. of meetings of CSR Committee held during the year No. of meetings of CSR Committee attended during the year

3. Provide the web-link where Composition of CSR committee, CSR Policy and CSR projects approved by the board is disclosed on the website of the company.

4. Provide the details of Impact assessment of CSR projects carried out in pursuance of sub-rule (3) of Rule 8 of Companies (CSR Policy) Rules, 2014, if applicable (attach the report).

5. Average net profit of the company as per section 135(5)

(a) Two percent of Average net profit of the company as per section 135(5)

(b) Surplus arising out of the CSR projects/ programmes or activities for the financial year

(c) Total CSR obligation for the financial year (6a+6b)

7. (a). CSR amount spent / unspent for the financial year:

Total Amount Spent for the Financial Year Amount Unspent
Total Amount transferred to Unspent CSR Account as per Section 135(6) Amount transferred to National Unspent CSR Fund as per second proviso to Section 135(5)
Amount Date of transfer Amount Date of transfer

(b) . Details of CSR amount spent against ongoing projects for the financial year:

1
2
3
4
5
6
7
8
9
10
11
12
S.
No.
Name of the Proj-ect
Project ID (if availa-ble)
Item from the list of activit-ies in schedule VII
Local Area (Yes / No)
Location of the Project
Project durat-ion
Amount alloca-ted for the project (in Rs.)
Amo-unt spent in the Current Finan-cial Year (in Rs.)
Amou-nt transf-erred to Unsp-ent CSR Acco-unt for the project as per Section 135(6) (in Rs.)
Mode of Implem-entation – Direct (Yes/No)
Mode of Implem-entation – Through Impleme-nting Agency
State
District
Name
CIN

(c). Details of CSR amount spent against other than ongoing projects for the financial year:

1
2
3
4
5
6
7
8
9
S.
No.
Name of the Project
Project ID (if available)
Item from the list of activities in schedule VII
Local Area (Yes/No)
Location of the Project
Amount spent for the project
Mode of Implementation – Direct (Yes/No)
Mode of Implementation – Through Implementing Agency
State
District
Name
CIN

(d). Amount spent in Administrative Overheads

(e). Total Amount Spent for the Financial Year (7b+7c+7d)

8. (a) Details of CSR amount spent/ unspent for the preceding three financial years:

1 2 3 4 5
Preceding Financial Year Amount transferred to Unspent CSR Account under section 135 (6) Amount Spent in the Current Financial Year(in Rs) Amount transferred to National Unspent CSR Fund as per second proviso to Section 135(5), if any Amount remaining to be spent in succeeding financial years
Amount (in Rs)
Date of Transfer

(b) Details of CSR amount spent for ongoing projects of the preceding financial year(s):

1
2
3
4
5
6
7
8
9
10
11
12
12
S.
No.
Proj-ect ID
Name of the Proj-ect
Item from the list of activi-ties in sched-ule VII
Local Area (Yes / No)
Location of the Project
Finan-cial Year in which the proj-ect was comm-enced
Proj-ect dura-tion
Total Amount alloc-ated for the project (in Rs.)
Amo-unt spent in the Curr-ent Finan-cial Year (in Rs.)
Cumul-ative Amount Spent till Curr-ent Finan-cial Year
Mode of Implem-entation – Direct (Yes / No)
Mode of Impleme-ntation – Through Impleme-nting Agency
Sta-te
Distr-ict
Na-me
CIN

9. Amount transferred to ‘Unspent CSR Account’ pursuant to sub-rule (4) of Rule 7 of Companies (CSR Policy) Rules, 2014 for the financial year 2014-15 to 2019-20

S. No. Preceding Financial Year Amount transferred to Unspent CSR Account under section 135 (6)
Total

10. In case of creation or acquisition of asset, furnish the details relating to the asset so created or acquired through CSR spent in the financial year.

(a) Date of creation/ acquisition of the asset(s)

(b) Amount of CSR spent for creation /acquisition of asset

(c) Details of the entity/ public authority under whose name such asset is registered, address etc.

(d) Provide details of the property or asset(s) created/ acquired (including complete address and location of the property)

10. Specify the reason(s) if the company has failed to spend two per cent of the average net profit as per section 135(5):

Sd-

(Chief Executive Officer
or Managing director or
Director)

Sd-

(Director or Chief Financial Officer)

Sd-

(Person specified under clause (d) of sub-section (1) of Section 380 of the Act )

( wherever applicable)

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