#1 COMPANIES (Corporate Social Responsibility Policy) Amendment Rules, 2021

 

COMPANIES (Corporate Social Responsibility Policy)

Amendment Rules, 2021

Introduction

Corporate Social Responsibility (CSR) means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Companies Act, 2013, but it shall not include activities undertaken in the normal course of business. CSR is also often referred to as business responsibility and an organization’s action on environmental, ethical, social, and economic issues.  CSR means manufacturing products in a way that doesn’t harm the environment and protects the consumer from potentially hazardous materials. The amendments introduced in Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 are as follow:

Rule 4, CSR Implementation

1.      From 1^st April 2021, entities are obligated under CSR to register itself with the Central Government by filing e-form CSR-1 electronically with the registrar.

2.      The above rule will not affect prior approved CSR projects and programs.

3.      Form CSR-1 will be filed electronically which shall be further verified by Chartered Accountant or Company Secretary or Cost Accountant. After the final submission on the portalhttps://csr.gov.in/register.php, the portal will generate CSR Registration number automatically (‘Unique CSR Registration Number’).

4.       The Company can collaborate with any other companies for undertaking projects or CSR activities. The CSR committees of respective companies, to report separately on such projects in accordance with these rules

5.      The Board shall satisfy itself that the funds so disbursed have been utilized for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to that effect.

6.      The Board of Directors of the Company shall monitor all outing CSR projects, for smooth implementation of the project within the permissible time period.

 

Rule 5, for sub-rule (2), following sub-rule substituted,

1.      The CSR Committee shall recommend to the board, on their annual plan regarding CSR policies, the following points will be included in that

a.       CSR projects and programs should be approved as mentioned in Schedule VII of the Act,

b.      The manner of execution as specified in sub-rule (1) of rule 4,

c.       Monitoring and reporting mechanism has been included,

d.      Details of need and impact assessment will be mentioned.

The board may alter their plan at any time during the financial year on the recommendation of its CSR Committee, with proper reason for such changes.

Rule 6, has been omitted.

Rule 7, CSR Expenditure

1.      For a financial year the administrative expenses shall not exceed five percent of total CSR expenditure.

2.      The surplus arising out of CSR activities shall not be a part of business profit and shall be utilized back in the same project or shall be transferred to an unspent CSR Account and used in future CSR policy or funds or it can be transferred in Funds specified in Schedule VII, within a period of six months of the expiry of the financial year.

3.      If the company spends excess amount over and above as mentioned under sub-section (5) of Section 135, it can be set off against the requirement to spend under sub-section (5) of section 135 up to immediate succeeding three financial years subject to following conditions –

a.       The surplus arising out of the CSR activities shall not include the excess amount available for set off.

b.      The Board of Directors of the company shall pass a resolution to that effect.

4.      The Capital Asset Created or Acquired from CSR Amount, it should be held by –

a.       A company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR registration under sub-rule (2) of rule 4

b.      Beneficiaries of the said CSR project, in from of self-help groups

c.       A public authority

 

Rule 8, CSR Reporting

1.      The annual report on CSR containing particulars specified in Annexure I or Annexure II, asapplicable.http://www.mca.gov.in/Ministry/pdf/CSRAmendmentRules_22012021.pdf

2.      In case of a foreign company, annual report on CSR will include balance sheet filed under clause (b) of sub-section (1) of section 381 of the Companies act, 2013, and an annual report, Annexure1 and Annexure 2 will be included as specified in the amendment.

3.      a. Every company having an average CSR obligation to the tune of ten crore rupees or more in the three immediately preceding financial years shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.

4.      b. The impact assessment report shall be submitted to the board and it shall be annexed with the annual CSR report.

c. The expenses for impact assessment can be booked towards CSR for that financial year; however, such an expense shall not exceed five percent of total CSR expenditure for the financial year or fifty lakh rupees, whichever is less.

Rule 9 Display of CSR activities on its website

The composition of the CSR Committee, CSR Policy, and Projects approved by the board shall be displayed on the company website for public access.

Rule 10 Transfer of unspent CSR amount

The unspent CSR amount, if any, shall be transferred by the company to any fund included in schedule VII of the Act.

Conclusion

Government is taking more and more initiatives towards Corporate Social Responsibility. CSR activities are helpful to society and it is the need of the hour to utilize the amount of CSR funds properly for the betterment of society.

By

Keerthan Shetty

Team K&T Forlex

Mumbai | Pune | New Delhi | Singapore | Shanghai

Reference Links

1.      http://www.mca.gov.in/Ministry/pdf/CSRAmendmentRules_22012021.pdf