Companies (Corporate Social Responsibility Policy) Amendment Rules 2021

Companies (Corporate Social Responsibility Policy) Amendment Rules 2021

The MCA has made major changes to the provisions related to Corporate Social Responsibility (CSR) under section 135 of the Companies Act 2013 and CSR Policy Rules 2014.

The Key amendments made include:

(1) Corporate Social Responsibility 

CSR has been redefined to mean the activities undertaken by a Company in pursuance of its statutory  obligation  laid  down  in  section  135  of  the  Act  in  accordance  with  the  provisions contained in these rules, but shall not include the following, namely:-

(i) activities undertaken in pursuance of normal course of business of the company:

Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research  and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that-

(a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act;

(b) details of such activity shall be disclosed separately in the  Annual report on CSR included in the Board’s Report;

(ii) any  activity  undertaken  by  the  company  outside  India  except  for training of Indian sports personnel representing any State or Union territory at national level or India at international level;

(iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act;

(iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019);

(v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;

(vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India

(2) CSR Policy

CSR Policy as been redefined to mean a statement containing  the  approach  and  direction  given  by  the  board  of  a company,  taking  into  account  the  recommendations  of  its  CSR  Committee,  and  includes  guiding principles for selection, implementation and monitoring of activities as well as  formulation  of  the annual action plan.

(3) CSR Implementation

Rule 4 related to “CSR Activity” shall be substituted by new rule called “CSR Implementation” which provides for classes of companies/entities who can undertake CSR activities on behalf of a company. However such entities are required to register themselves with the Central Government by filing the form CSR-1 electronically with the Registrar, with effect from the 01st day of April 2021 and such company shall be assigned a unique CSR Registration Number.

(4) The CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy.

(4) CSR Expenditure.

The  board  shall  ensure  that  the  administrative  overheads  shall  not  exceed  five percent of total CSR expenditure of the company for the financial year.

Any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy and annual  action plan of the  company or transfer such surplus amount to a  Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.

Where a company spends an amount in excess of requirement, such  excess  amount  to be set  off  against  the  requirement  to  spend  up to immediate succeeding three financial years

(5) CSR Reporting 

he Board’s Report of a company shall include an annual report on CSR. Every company having average CSR obligation of ten crore rupees or more in three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects. The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.

(6) Transfer of unspent CSR amount

Until a fund is specified in Schedule VII for the purposes of sub-section (5) and(6) of section 135 of the Act, the unspent CSR amount shall be transferred by the company to any fund included in schedule VII of the Act.

Format of the Annual Report on CSR Activities has been prescribed

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