Companies (CSR Policy) Amendment Rules, 2021 PDF Download

 Companies-CSR-Policy-Amendment-Rules-2021

Companies (Corporate Social Responsibility Policy) 
Amendment Rules, 2021

 MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 22nd January, 2021

G.S.R. 40(E).—In exercise of the powers conferred by section 135 and sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Corporate Social Responsibility Policy) Rules, 2014, namely:-

1. Short title and commencement.

(1) These rules may be called the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.

(2) They shall come into force on the date of their publication in the Official Gazette unless explicitly provided elsewhere in this notification.

2. In the Companies (Corporate Social Responsibility Policy) Rules, 2014 (hereinafter referred to as the said rules), for rule 2, the following rule shall be substituted, namely:-

“2. Definitions. - (1) In these rules, unless the context otherwise requires,-

(a) "Act" means the Companies Act, 2013 (18 of 2013);

(b) “Administrative overheads” means the expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme;

(c) "Annexure" means the Annexure appended to these rules;

(d) “Corporate Social Responsibility (CSR)” means 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;

(e) "CSR Committee" means the Corporate Social Responsibility Committee of the Board referred to in section 135 of the Act;

(f) "CSR Policy" means 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;

(g) “International Organisation” means an organisation notified by the Central Government as an international organisation under section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply;

(h) "Net profit" means the net profit of a company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following, namely: -


(i) any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and

 

(ii) any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act:

Provided that in case of a foreign company covered under these rules, net profit means the net profit of such company as per profit and loss account prepared in terms of clause (a) of sub-section (1) of section 381, read with section 198 of the Act;

(i) “Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall include 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;

(j) “Public Authority” means ‘Public Authority’ as defined in clause (h) of section 2 of the Right to Information Act, 2005 (22 of 2005);

(k) “section” means a section of the Act.

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From which date the Companies (CSR Policy) Amendment Rules, 2021 are effective? 

The Companies (CSR Policy) Amendment Rules, 2021 are effective from 22nd January 2021.

What are the key changes in provisions related to Corporate Social Responsibility after the applicability of Companies (Corporate Social Responsibility  Policy) Amendment  Rules,  2021 ? 

The key changes in the provisions related to CSR after the applicability of Companies (Corporate Social Responsibility Policy) Amendment  Rules,  2021 are summarized below ;

Courtesy: Complied by CS Amit Gupta   

Sr. No.

Subject

Key Changes

1.

CSR Spending

CSR spending made Mandatory from Voluntary

2.

Treatment of unspent amount

 Unspent amount not relating to ongoing Project: Where amount doesn’t relate to any ongoing project, then in case of failure to spend the same, will require carrying forwarding of the same to a Fund specified in Schedule VII, within 6 months of close of financial year, in addition to disclosure of reasons for not spending in Board Report. So amount remaining unspent (other than ongoing project)  for  the  financial  year  2020‐21  shall  be transferred to Schedule VII fund latest by September 30, 2021.

  Unspent amount relating to Ongoing Project -­‐ To be transferred within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account (UCSRA). So amount remaining unspent (ongoing  project)  for  the  financial  year  2020-­‐21 shall be transferred to UCSRA latest by April 30, 2021.

 Extended time for spending unspent amount relating to ongoing Project Such amount shall be spent within a period of 3 financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year. So amount remaining unspent transferred for FY 2020‐21   to   UCSRA,   has   to   be   utilized   for   the project   upto   FY   2023-‐24,   otherwise   shall   be transferred to a fund specified in Schedule VII.

3.

Consequence of non transfer in aforesaid manner

Offence decriminalised vide CAA, 2020

Company liable to pay penalty twice the default or Rs. 1 cr, which ever is less Every officer liable to pay penalty @ 10% of default or Rs. 2 lacs, which ever is less

4.

Setoff of excess amount spend towards CSR in succeeding years

Excess   amount   may   be   set   off   against the requirement to spend under section 135(5) up to immediate succeeding three financial years subject to the conditions that –

•   the excess amount available for set off shall not include the surplus arising out of the CSR  activities,  if  any,  in  pursuance  of  sub-rule (2) of this rule.

•  the Board of the company shall pass a resolution to that effect.

5.

Administrative Overheads

·    Definition added.

·    Only the expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions classified as Administrative overheads.

·  The expenses directly incurred for the designing,  implementation, monitoring and evaluation of a particular Corporate Social Responsibility project or programme specifically excluded.

·   The administrative overheads not to exceed five percent of total CSR expenditure of the company for the financial year.

6.

CSR definition

Inclusive definition now made exclusive and activities not considered as CSR specified clearly. Accordingly the following activities shall not be considered CSR:

·   Activities undertaken in pursuance of normal course of business of the company (except COVID 19 related R & D up to the financial  year  2022-­‐23,  subject  to  certain conditions);

· 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);

·   Contribution of any amount directly or indirectly to any political party under section 182 of the Act.

·   activities that significantly benefit the employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019);

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

·   activities carried out for fulfillment of any other statutory obligations under any law  in force in India;

7.

CSR Policy

CSR Policy to include:

   approach and direction given by the board of a company, taking into account the recommendations of its CSR Committee;

 guiding principles for selection, implementation and monitoring of activities;

     formulation of the annual action plan.

8.

CSR Committee

·  CSR Committee not required, if amount to be spent by a company does not exceed fifty lakh rupees.

·  In such cases Board shall  discharge all functions of CSR Committee.

9.

Ongoing Project

·   “Ongoing   Project”   means   a  multi-­‐year   project having timelines not exceeding three years excluding the financial year in which it was commenced.

·    Project that was initially not approved as a multi-­‐ year project can be made ongoing by extending the duration beyond one year by the board based on reasonable justification.

·   It appears that CSR Project duration can not be more than three years.

10.

Implementing Agency

·   Companies can do CSR either on its own or through Implementing Agency.

 

·    Three major changes had been made:

1. w.e.f. 01.04.2021 registration of such entity shall be mandatory by filing form CSR 1. Unique CSR Registration Number shall be generated for each entity.

2.Only registered public trust now allowed as against any registered trust, except in case established by CG/SG.


3.In addition to registration under respective act, registration under the provisions of section 12A & 80 G of the Income Tax has been made mandatory. 12A is understandable, as it exempts the entity from tax liability.

 

·  80G provides deductions to donor, why 80G has been made mandatory is not clear.

·  Track record of three years in similar programs or projects has been replaced by similar activities. In what manner it shall affect the implementing agencies?

11.

Engagement of International Organisations

   A company may engage international organisations for designing, monitoring and evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity building of their own personnel for CSR.

 Only Central Government notified organisations shall qualify as International Organisation

12.

Responsibility of a Board and CFO

  The Board shall be responsible to:

o   satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved by it.

o  monitor the implementation of  the project with reference to the approved timelines and year-­‐wise allocation

o  to make modifications, if any, for smooth implementation of the project within the overall permissible time period

 

o  CFO or the person responsible for financial management shall certify to the effect.

13.

Annual Action Plan

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

  Annual Action Plan to include:

o  List of CSR Projects approved

o  Manner of execution

o modalities of utilisation of  funds and implementation schedules


o  monitoring and reporting mechanism

  On recommendation of CSR Committee Annual Action Plan may be altered by the Board.

14.

Treatment of surplus arising out of CSR activities

o Any surplus arising out of the CSR activities shall not form part of the business profit of a company.

o  Such surplus shall be ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy / 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

15.

Capital Assets

o  The CSR Assets to be held by a Section 8 Company, or Registered Public Trust, or registered society with charitable objects, having CSR registration number or beneficiaries of the said CSR project, in the form of self-­‐help groups, collectives, entities or a public authority.

 

o  Any CSR asset created prior to these Rules, required to comply within a period of 180 days (Board may extend by 90 days).

16.

CSR Reporting

   From financial year starting on or after April 01, 2020 CSR report shall be in Annexure – II, previous years Annexure I shall continue.

 Annexure II mandates additional disclosures regarding:

o  Impact assessment

o  Amount available for Setoff

CSR amount spent  against ongoing project/other than on going project

o  Administrative overhead

o  Unspent amount against ongoing project/other than ongoing project

o  Details regarding capital assets

17.

Impact Assessment

• A company having the obligation of spending average CSR amount of Rs 10 Crore or more in the three immediately preceding financial years in pursuance of Section 135(5) of the Act, shall undertake impact assessment.

  Impact assessment to be done by an independent agency.

  Impact assessment to be done in respect of 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.

  The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.

  Impact assessment expenditure for a financial year shall not exceed five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.

18.

Website Disclosure

o New Disclosure on Website – CSR Committee constitution, CSR Projects approved.

19.

National Unspent CSR Fund

   Central Government shall establish a ‘National Unspent CSR Fund’ for purpose of transferring the unspent amount of companies , which shall be then used for activities outlined in Schedule VII.

     Until such fund is created the unspent CSR amount in terms of provisions of sub-­‐section (5) and (6) of section 135 of the Act shall be transferred by the company to any fund as specified in schedule VII of the Act.

     PMNRF, PM CARES, Swach Bharat Kosh, Clean Ganga Fund are the funds specified under Schedule VII.

20.

Form CSR 1

  For registration of Implementing agencies

   Unique CSR     Registration Number shall be generated for each entity


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