Summary: The Corporate Social Responsibility (CSR) provisions, under the Companies (Amendment) Act, 2020, and subsequent amendments in 2021, define the term “ongoing project” as a multi-year initiative extending over multiple financial years but with a maximum duration of three years. The project must commence within the financial year to be considered ongoing. If a CSR activity stretches beyond the prescribed time, it must be re-evaluated by the Board for potential adjustments. Companies must maintain separate unspent CSR accounts for each multi-year project. Any unspent funds after three years should be transferred to a specified fund under Schedule VII of the Companies Act. The CSR Board is responsible for identifying, allocating funds, and ensuring proper tracking and disclosure of the ongoing projects, both publicly and in the annual CSR reports. If the project’s completion is delayed or halted, the company must transfer the remaining funds to the prescribed funds within 30 days. The guidelines aim to ensure transparency and effective management of CSR activities across companies.
Introduction: In this editorial, the author shall discuss a very important point in relation to the Corporate Social Responsibility, i.e., Ongoing Project. The long-awaited amendments to the CSR provisions brought by the Companies (Amendment) Act, 2020, (‘CAA, 2020’) have finally been made effective by MCA, vide its notification dated January 22, 2021. Along with this, MCA has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (Amendment Rules).
➣ The Amendment Rules have been notified with immediate effect and thus would be applicable with effect from the date of the Gazette Notification, that is, 22nd January, 2021.
➣ the amendments are not retrospective or retroactive.
- Applicable Section(s)
Section 135 of companies Act, 2013
- Applicable Rule(s)
Rule 2(1)(i) of CSR Rules.
- Applicable Form
From CSR -2.
Meaning – of Ongoing Project
Rule 2(1)(i) of Amendment Rules defines the term ‘ongoing project’ as:
a) a multi-year project, stretching over more than one financial year;
b) having timeline not exceeding three years excluding the year of commencement
c) includes such project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the Board based on reasonable justification.
In general word, Ongoing project means a multi-year project. If a company undertakes any CSR activity of project which will not complete in a year or will be completed not exceeding 3 years it will be considered as the ongoing project.
Unspent CSR Account:
As per Section 135(6), an unspent CSR account is to be opened by the Company.
Que: If company is having more than one on going project, whether one CSR unspent account is enough?
For transparency and tracking of the fund, the Company should have open CSR unspent account for each muti year project. Further, the obligation to open an unspent CSR account year wise and project wise.
Time Limit for Ongoing Project:
As ongoing project is multi year project. The project should have commenced within the financial year to be termed as ‘ongoing’. The intent to include a project which has an identifiable commencement and completion dates.
Que: When will an ongoing project be regarded as ‘commenced’?
An ongoing project will commence when the company either issues the work order pertaining to the project or award the contract for execution of the project and document so as an ongoing project. However, the requirement of spending on such a project is not necessary if the company has undertaken a binding commitment towards such project.
Que: How to calculate 3 years for the purpose of CSR Project?
The maximum permissible time period shall be three financial years excluding the financial year in which it commenced i.e. (1+3) financial year.
Que: What if the Board has identified a project with an estimated gestation period of 4 years? Will that qualify as ‘ongoing project’?
The duration of an ongoing project can’t exceed 3 years excluding the financial year in which it was commenced. For example: if a project is approved during 2024-25 the maximum permissible time limit is 31st March 2028.
There is one more school of thought, even though a project has a time span of more than 3 years for example, 4,5,6 year. These projects should also be considered as ongoing projects. The only condition is that the company must spend whole allocated amount in 3 years.
Transfer of unspent amount after 3 years:
After the conclusion of the maximum time line of 3 financial years the amount/ balance amount allocated to the project and remained in the unspent CSR account has to be transferred to any of the fund specified in Schedule VII of the Act, within a period of 30 days from the date of completion of the third financial year.
As per above example, if project approved in 2024-25 then the maximum permissible time limit is 31st March 2028. The company has to transfer the unspent amount in 30 days from 31st March 2028 to funds mentioned in schedule VII.
i. Actual Expenditure is less than amount transferred to unspent account In such case, the company shall transfer the access amount the fund mentioned in schedule VII a per above mentioned provisions.
ii. Actual Expenditure is more than amount transferred to unspent account If the budget allocated towards a CSR project fails short, the Company may spend further amount towards the completion of the project and such excess spending can be availed as set off against the subsequent years CSR obligations subject to provision of law.
iii. Non completion of project due to obstacle and stopped in between:
If any project stopped during the tenure of 3 year due to any obstacle or conditions. Then Company shall transferred all the unspent amount to funds mention in Schedule VII on closure of such project.
Que: Is it going to be regarded an ongoing project if money is handed to an intermediary to build a hospital, for example?
Regardless of the circumstances surrounding the project’s implementation—by the corporation or an outside entity
It will be considered an ongoing project by the implementing agency if it is a multi-year endeavor with a duration of no more than three years (not including the year of start).
Difference Between ongoing project and other than ongoing project:
| Basis | Ongoing Project | Other Than ongoing |
| Maximum Duration | Can extent for a maximum period of three years from the year of commencement | Is required to be concluded within the year of reporting i.e. 1 financial year |
| Setting aside funds | Funds allocated to an ongoing project are required to be deposited in a separate bank account in the name of unspent CSR account | No separate account is created. |
| Transfer to Schedule VII | On the failure to spend the allocated amount within 3 financial years from year of commencement | On the failure to spend the allocated amount within the year to which the obligation relates |
Boards Responsibility:
Following are responsibilities of Board for Ongoing Project:
a) Identification of the ongoing projects:
b) Year-wise allocation of funds:
c) Transferring the unspent money to a separate bank account as prescribed u/s 135(6)
d)Making modifications, if any, for smooth implementation of the projects within the overall permissible time period.
The Board of directors are on the fiduciary position to implement and monitor the CSR activities as CSR is board driven process, and the board of the Company has been suitably empowered to plan the same.
Disclosure of Ongoing Project:
The Company need to disclose the ongoing project at followings:
a) On the website of the Company for public access;
b) Annual Report of CSR i.e. CSR-2
c) Annexure to Directors Report
d) Notes to Profit and Loss Account
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Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).
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