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♦ Section 135 r/w Schedule VII of the Companies Act, 2013 (2013 Act) introduces the concept of Corporate Social Responsibility (CSR) as a statutory obligation of companies. Further, Companies (Corporate Social Responsibility Policy) Rules, 2014 (CSR Rules 2014) deal with the CSR norms in detail. Vide notifications and/or amendments, more activities have been added to the list of CSR activities (Schedule VII of 2013 Act), from time to time.
♦ The following amendments to the 2013 Act (relating to CSR) and CSR Rules 2014, have come into force with effect from January 22, 2021:
- The Companies (Amendment) Act, 2019 (“2019 Act”) and Companies (Amendment) Act, 2020 (“2020 Act”)
- The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (“Amended CSR Rules”)
♦ Pursuant to the abovementioned amendments, the key changes are as follows:
- A negative list of what would not be considered as CSR has been provided.
- Implementation agencies/partners for CSR activities to be registered with the Central Government/MCA.
- Enhanced obligations of the Board & CSR Committee.
- Introduction of Administrative overheads with prescribed 5% cap on such expenses.
- Mandatory impact assessment of CSR projects by companies satisfying the Rs. 10 Crores threshold.
- Transfer of unspent CSR amount to a separate account.
- Setting off excess spending on CSR activities in the succeeding financial years.
- Companies which have CSR spending obligation up to Rs. 50 Lakhs shall not be required to constitute the CSR Committee.
♦ In light of the above, for CSR activities undertaken by any company, the following compliance checklist may be considered:
| Sr. No. | Provision | Particulars | Compliance Requirement |
| 1. | Rule 2(1)(d)
Definition of CSR |
|
To check whether the activities are covered under Schedule VII and check the activities against the negative list. |
| 2. | Rule 4
Implementing Partner |
|
Request the Implementing Partner to share the copy of the Registration Certificate. |
| 3. | Rule 5(2)
Annual Plan |
|
To formulate an Annual Action Plan and get it approved by the CSR Committee of the Board.
|
| 4. | Rules 4(5) and 4(6) r/w Rule 5(2)
Enhanced monitoring power of the Board |
|
To create a monitoring framework to track the progress of the CSR activities undertaken by the Implementing Partners. |
| 5. | Rule 7(1) r/w Rule 2(1)(b)
Administrative Overheads |
|
While making the budget for the CSR activities, company must bear in mind that the administrative overheads (general management and administration function) do not exceed 5% of the total CSR expenditure. |
| 6. | Rule 7(2)
Unspent CSR Funds |
|
In case of unspent amount, company to opt for any of the prescribed routes within a period of 6 months of the expiry of the financial year. |
| 7. | Section 135(5) r/w Rule 7(3)
Set-off of Excess CSR Spending |
|
In the event company spends more than the statutory obligation, it can avail the set off in the succeeding 3 years if it satisfies the pre-conditions. |
| 8. | Rule 8(1)
CSR Reporting |
The Board’s Report of a company pertaining to any financial year shall include an annual report on CSR. | The Board’s Report to include the annual report on CSR as per the format specified in Annexure I (up to FY 2020-21) or II (from FY 2021-22 onwards) |
| 9. | Rule 8(3)
Impact Assessment |
A company which is obligated spend a minimum CSR amount of INR 10 Crore and above, should undertake impact assessment (through an independent agency) for those CSR projects that have outlays of INR 1 crore and above. | If applicable, company to undertake impact assessment through an independent organization. |
| 10. | Rule 9
Reporting of CSR activities on Website |
|
Upload the requisite information on the website. |
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Kindly clarify about the status of unspent amount of earlier years.Whether these are requred to be deposited to funds specified in schedule VII within 6 months of the close of F. Y. 2021 or left unspent for ever.