A glance towards latest reforms in corporate social Responsibilty

-The concept of Corporate Social Responsibility (CSR) is introduced in India by the Companies Act, 2013, initially this concept was voluntary but The Companies (Amendment) Act, 2020 and Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 imposed mandatory requirement upon companies to comply with CSR obligations.

– This presentation is dedicated to the recent reforms introduced in CSR.

Constitution of CSR Committee

  • Where the amount to be spent by a company under CSR obligation does not exceed INR 50 Lakh the Company shall not required to constitute CSR committee and the functions of CSR committee will be discharge by Board of Directors of such Company.
  • Effective from 22.01.2021

Mandatory Impact Assessment

  • Every company having average CSR obligation of INR 10 Cr. or more in the 3 immediately preceding financial years, shall undertake impact assessment of their CSR projects having outlays of INR 1 Cr. or more, through an independent agency.
  • At least 1 year shall be passed away of completion of such CSR project while undertaking the impact study.
  • The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR
  • Effective from 22.01.2021

Administrative Overheads

  • The administrative overheads towards CSR shall not exceed 5% of the total CSR expenditure for that financial year.
  • “Administrative overheads” means the expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme.
  • Effective from 22.01.2021

CSR fund Utilisation Certification

  • Chief Financial Officer or the person responsible for financial management shall certify to the Board of Directors that the funds so disbursed towards CSR have been utilised for the purposes and in the manner as approved by it.
  • Effective from 22.01.2021

CSR Implementation

  • CSR activities shall be undertaken by:
    • Company it self or;
    • a company established under section 8 of the Act by company or State Govt. or Central Govt. or;
    • registered public trust or a registered society established by the company or State Govt. or Central Govt. or;
    • any entity established under an Act of Parliament or a State legislature or;
    • a company established under section 8 of the Act, or a registered public trust or a registered society having an established track record of at least three years in undertaking similar activities.
    • Effective from 01. 04.2021

CSR Registration

  • Every entity who intends to undertake any CSR activity, shall register itself with the Central Government by filing the form CSR-1
  • CSR projects or programmes approved prior to the 01st day of April 2021 will not required to get registered.
  • On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically
  • Effective from 01. 04.2021

Annual Action Plan

  • The CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance to its CSR Policy, which shall include the following:
    • the list of CSR projects or programmes that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act
    • Manner of the execution of such projects
    • Modalities of utilization of funds and implementation of schedule for the projects or programmes
    • Monitoring and reporting mechanism for the projects or programmes; and
    • Details of need and impact assessment, if any, for the project undertaken by the Company.
    • Effective from 01.04.2021

CSR Surplus Treatment

  • Any surplus arising out of CSR activities shall not form part of the business profits of a company. Effective from

CSR Surplus Treatment

Excess Amount Spent

  • Where a company spends an amount in excess of requirement, such excess amount may be set off against the requirement to spend up to immediate succeeding three financial years subject to the conditions that:
    • The excess amount available for set off shall not include the surplus arising out of the CSR activities
    • The Board of the company shall pass a resolution to that effect.
  • Effective from 22.01.2021

Capital Assets under CSR

  • The amended rules allow the CSR funds to be spent for creation or acquisition of a capital asset, However, the capital assets shall be held by:
    • The CSR Assets to be held by a Section 8 Company, or a Registered Public Trust, or registered society with the charitable objects, having CSR registration number; or
    • Beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or
    • A public authority
  • Note: Any CSR asset created prior to these Rules, 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.
  • Effective from 22.01.2021

CSR Reporting

  • A new format has been prescribed for annual report on CSR having enhanced reporting requirements and includes the following disclosures:
    • Details regarding meetings of CSR committee;
    • Details of impact assessment of CSR projects;
    • Set-off of any excess CSR amount against future CSR obligations;
    • Amount spent on administrative overheads, impact assessment, if applicable, and on ongoing projects; etc.
  • Effective from 22.01.2021

Website Disclosure:

  • The Board of Directors of the Company shall mandatorily disclose the followings details on its website (if any):
    • Composition of CSR Committee;
    • CSR Policy;
    • Projects approved by the Board
  • Effective from 22.01.2021

Treatment of Unspent Amount

Effective from 22.01.2021

Treatment of Unspent Amount

Activities shall not include in CSR

  • Activities undertaken in pursuance of the normal course of business of the company.
    • Exception: Activities related to the COVID-19 in their normal course of business may undertake such activities for the financial years 2020-21, 2021-22, 2022-23 subject to the certain conditions
  • Any activity under taken by the company out side the India
    • Exception: Training of the Indian sports personnel representing any Stateor Union territory at the national level or India at International level
  • Political Contribution
  • Activities benefitting employees of the company.
  • Activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services
  • Activities carried out for the fulfilment of any other statutory obligations under any law in force in India

Penal Provisions

Author Bio

Name: Vinay
Qualification: CS
Company: N/A
Location: Udaipur, Rajasthan, India
Member Since: 28 Mar 2021 | Total Posts: 1

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April 2021