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CSR Initiatives – the way forward

On 22nd January 2021, the Ministry of Corporate Affairs has made effective the amendments of the Companies (Corporate Social Responsibility) Rules, 2021. Major amendments have been done with respect to definitions, CSR Implementation, CSR Committees, CSR Expenditure, CSR Reporting, Website Disclosure and Transfer of unspent CSR.

Amongst the amendments the notable one is the amendment to the definition of “Corporate Social Responsibility”, which is as follows:

“Corporate Social Responsibility” means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Companies Act, 2013 in accordance with the provisions contained in these rules, but shall not include the following, namely: –

  1. 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;

  2. 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;

  3. contribution of any amount directly or indirectly to any political party under section 182 of the Act;

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

  5. activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;

  6. activities carried out for fulfilment of any other statutory obligations under any law in force in India;

In addition to above, there are amendments to implementation and reporting requirements with respect to the CSR initiatives.

  • Now, every entity, who intends to undertake any CSR activity, shall register itself with the Central Government by filing the form CSR-1 electronically with the Registrar, with effect from the 01st day of April 2021. On successful submission of the said form CSR-1 a unique CSR Registration Number shall be generated by the system automatically.

  • Further, every company having average CSR obligation of Rs. 10 Crores or more in the 3 immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of Rs 1 Crore or more, and which have been completed not less than one year before undertaking the impact study. A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed 5% of the total CSR expenditure for that financial year or Rs 50 Lakhs, whichever is less.

With the new amendments coming in, it is an effort in the right direction to make the dealings transparent. The new requirements of registering before one can take up any CSR activity, and getting the impact assessment done has put the onus on the entities to ensure compliance and avoid scrutiny.

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