CORPORATE SOCIAL RESPONSIBILITY AMENDMENT

UTILIZATION OF UNSPENT AMOUNT ON CSR ACTIVITIES (OTHER THAN ONGOING PROJECTS) [SECTION 135(5)]

Reason for not spending the amount

Transfer such unspent amount

To a fund specified in Schedule VII

Within 6 months

Of the expiry of the financial Year

Corporate Social Responsibility (CSR) Amendment- Section 135

UTILIZATION OF UNSPENT AMOUNT ON CSR ACTIVITIES (IN CASE OF ONGOING PROJECTS) [SECTION 135(4)] 

Transfer such unspent amount

To a special account called the UNSPENT CORPORATE SOCIAL RESPONSIBILITY ACCOUNT

To be spent within 3 financial years from the date of such transfer

Failing which

Transfer such sum to a fund specified in schedule VII

Within 30 days

From the date of completion of the third financial year

*Ongoing Project means Multiyear Project undertaken having timelines exceeding 1 year but not exceeding 3 years.

* That the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities. In case company has not find suitable projects in the Local Areas then it may by passing of Board Resolution spend such amount outside local area. Therefore it can be concluded that the said direction is not mandatory is nature but it should be follow in true letter and spirit. 

*Further company may spend CSR expenditure either by itself or through Registered Trust or Society or Section 8 Company. Further it is stated that with effect from 01/04/2021 aforesaid Trust, Society, Section 8 Company must be registered on MCA portal by filing of Form CSR-1

*Due to spread of novel corona Virus (COVID19) in India, it is clarified with a circular No. 10/2020 dated 23.03.2020 that spending of CSR funds for COVID-19 is eligible CSR activity.

Composition and Quorum of the CSR Committee 

Company having Independent Director (ID) on its Boards should constitute CSR committee with 3 directors including a ID as its members. Whereas private company who doesn’t require to appoint  ID and have only 2 directors on the Board can constitute CSR committee with only 2 members.

Quorum has not been specified under the Act but as per SS-1, in case of Committee meetings if quorum shall be specified by the Board otherwise presence of all the members is required to constitute quorum.

Vaccination of Employees- a CSR Activity 

It has been made clear by the MCA through its FAQ that vaccination programme organized by the Company for its employee is not a CSR activity rather a vaccination programme organized by the company for general public(can includes their employee as well) is covered under CSR. Amount spent on vaccination of group companies employee is not CSR activities as well.

CFO certification and Impact Assessment (IA) 

CFO or person responsible of financial management shall certify that CSR funds has been utilized for the purpose for which it has been granted. Further the Requirement of obtaining Utilization Certificate from Independent Chartered Accountant is not mandatory but it is advisable to obtain that.

Impact assessment is mandatory for companies with a CSR budget of INR 10 crore or more in the 3 immediately preceding FY and all projects with outlays of INR 1 crore or more. The Impact assessment report shall be annexed with annual report on CSR. Further there is no specific criteria or qualification has been prescribed for who can do IA but it should be done by Independent Entity.

Activities not considered as CSR Activity 

1. Activities undertaken in pursuance of normal course of business of the company.

2. Contribution to political party

3. Activities benefitting employees of the Company

4. activities carried out for fulfilment of any other statutory obligations

5. any activity undertaken by the company outside India except for training of sports player representing at national level or international level

6. activities though sponsorship which give marketing benefits to the Company

Penal Provision 

If a company is in default in complying with the provisions of sub-section (5) or subsection (6), the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.

*Disclaimer: The aforesaid article is only fair view of Section 135 of Companies Act, 2013 and its related rules. This is only for educational purpose and it is not an advice/opinion. Readers are requested to verify the same before relying on the aforesaid article and Author holds no responsibility.

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