Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021– Major Highlights
Ministry of Corporate affairs has come up with major amendments in the Companies (CSR) Rules, 2014 through enforcement of Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 on 22nd January, 2021.
Earlier, the Companies had the option to either Comply or Explain i.e to give a mere explanation and reasons for not spending the required CSR amount in the Board Report. The enforcement of these amendments shall lead to curb the mis-appropriation of funds by Companies and induce proper disclosure and utilisation of Unspent CSR amount.
The following are the highlights to be kept in mind by a CSR compliant company:
(1) Activities undertaken in normal course of business. However there are certain exceptions:
– Any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake R&D of COVID vaccine for FY 20-21,21-22, and 22-23; subject to that the R&D should be carried out in collaboration with any other institutes and organisations eligible and mentioned under Sch- VII ( e incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government or State Government or Public Sector Undertaking)
(ii) Contribution to any Political Party not treated as CSR activity
(iii) Sponsorship Activities by company for marketing its products/services not treated as CSR
(iv) Any activity undertaken outside India (except for the training of the Indian sports personnel representing any State or Union territory at the national level or India at International level)
(v) Activities/Expenses for Employee benefits
(vi) Activities carried out for fulfilling other statutory obligations under Law of Indias
2) Every Company undertaking CSR activity/ payment itself or making payment towards CSR activities trust/society/NGO shall mandatorily get registered with MCA filing CSR-1 form. [The same shall be w.e.f 1st April,2021, CSR payments approved prior to this date shall remain unaffected by this rule]
3) On getting registered with MCA shall generate a Unique CSR Registration Number for the Company or Trust/ NGO/society, as the case maybe
4) Funds disbursed and utilized towards CSR activities shall now be certified by CFO or Financial Head.
5) Board shall monitor the timely implementation of any on-going CSR projects.
6) Formulation of annual action plan by CSR committee- List of CSR activities/manner of execution/ utilisation of fund and timelines/ monitoring of projects.
7) Administrative Overheads shall not exceed 5% of total CSR expenditure of the Company for the F.Y. ‘Administrative Overhead’ for the purpose of these rules means “the expenses incurred for the general management and administration of CSR functions but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of CSR projects.”
8) Disclosure of CSR activities on Companies website namely; Composition of CSR Committee, CSR Projects approved by Board.
9) The Board report shall include an annual report on CSR in the format as prescribed under this amendment rules. (Annexure-1 for FY 2020-21 and Annexure-2 for FY 2021-22)
10) Any surplus arising out of CSR activities shall be ploughed back into the same project OR transferred to the Unspent CSR account OR to a Fund specified in Schedule VII.
11) Transfer of Unspent CSR amount to Funds specified under Schedule VII
1. Contribution to the prime minister’s national relief fund [or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)] or any other fund set up by the central govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women.
2. Contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga
3. Contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation