Ignore amendments in Corporate Social Responsibility (CSR) provisions at your own risk !
CSR provisions are applicable to every company including its holding or subsidiary company having net worth of INR 500 crores or more or turnover of INR 1000 crores or more, or Net profit of INR 5 crores or more during the immediately preceding financial year. Given below are the amendments made in the CSR provisions which are too significant to be ignored :-
♦ Every entity, which intends to undertake any CSR activity shall register itself with the Central Government by filling e-form CSR-1 with the Registrar w.e.f 01.04.2021.
♦ To ensure transparency, 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 access.
♦ Every company having average CSR obligation of Rs.10 Crore or more in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of Rs. 1 crore rupees or more.
♦ In the case of ongoing project the company is required to transfer the Unspent amount to a special “Unspent CSR Account” within 30 days from the end of financial year and spend it within 3 financial years from the date of such transfer.
♦ In the case of Unspent amount not relating to an ongoing project the unspent amount shall be transferred to a Fund specified in Schedule VII within 6 months of the end of the financial year.
♦ The board shall ensure that the administrative overheads shall not exceed 5% of total CSR expenditure of the company for the financial year
♦ The CSR amount may be spent by a company for creation or acquisition of a capital asset, which can be held by (i) Section 8 company, public charitable trust (ii) Beneficiaries of CSR project (iii) A public authority.
♦ Contravention and penalty: The Act has now implemented penalty for non-compliance now which is a fine equal to twice the amount required to be transferred or Rs.1 crore whichever is less. In case of every officer of the company the fine is one-tenth of the amount required to be transferred or Rs. 2 lakhs whichever is less.
If a company ceases to meet the criteria of applicability of CSR for three consecutive financial years then it is not required to comply with CSR provisions till such time as it meets the specified criteria.
The amendments in the CSR provisions puts an onerous responsibility on the Board of directors and the officers of the company with the intention of improving good governance, transparency, reporting and disclosure in the corporate sector.
The author is a practicing Chartered Accountant, Senior Partner in Kohli Chitkara & Co. LLP and can be contacted at [email protected] Any comments or queries are welcome.