Ministry of Corporate Affairs has issued Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, in order to bring transparency and increase the accountability of the Companies undertaking CSR Activities. The following major amendments have been made:
- In house activity of R&D in relation to Covid-19 medicine may be included in the CSR Activities: Companies may undertake research and development activities in relation to the new vaccine, drugs and medical devices in their normal course of business related to COVID - 19 for financial years 2020 - 21, 2021 - 22, 2022 - 23 subject to the conditions that such research and development activities shall be carried out in collaboration with any of the institutes or organizations mentioned in item (ix) of Schedule VII to the Act and details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report.
- Mandatory Registration of CSR Entity: Every entity which 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. For the new projects taken w.e.f. 1st April 2021. From CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally by a Chartered Accountant in practice or a Company Secretary in practice or a Cost Accountant in practice. On the submission of the Form CSR - 1 on the portal, a unique CSR Registration Number shall be generated by the system automatically. This will help the Companies to identify the entities involved in the CSR activities on behalf of other companies and also enhance transparency.
- Engagement of International Organizations for CSR Designing: A company may engage international organizations for designing, monitoring and evaluation of the CSR projects or programmes as per its CSR policy as well as for the capacity building of their own personnel for CSR.
- A collaboration of other Companies for CSR Expenditure: A company may also collaborate with other companies for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programmes in accordance with these rules.
- Certification by CFO of Finance head: The Board of a company shall satisfy itself that the funds of CSR 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 the effect.
- CSR Committee shall formulate the Annual Action Plan: The C SR Committee of the Company shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall include following:
- the list of CSR projects or programmes that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act;
- the manner of execution of such projects or programmes;
- the modalities of utilization of funds and implementation schedules for the projects or programmes;
- monitoring and reporting mechanism for the projects or programmes;
- details of need and impact assessment, if any, for the projects undertaken by the company :
Provided that Board may alter such plan at any time during the financial year, as per the recommendation of its CSR Committee, based on the reasonable justification to that effect
- Set off of Expenses Expenditure of CSR: Where a company spends an amount in excess of requirement provided under subsection (5) of section 135, such excess amount may be set off against the requirement to spend under subsection (5) of section 135 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,
- the Board of the company shall pass a resolution to that effect.
- CSR on Creation/acquisition of asset: The CSR amount may be spent by a company for creation or acquisition of a capital asset, which shall be held by
- a company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR Registration Number; or
- beneficiaries of the said CSR project, in the form of self - help groups, collectives, entities; or
- a public authority.
- CSR Impact Assessment: Every company having average CSR obligation of Rs. 10 Crores or more in pursuance of subsection (5) of section 135 of the Act, 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. The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.
- Display of CSR activities on its website: The Board of Directors of the Company shall ensure mandatorily disclosure of the following on the website of the Company if any:
- the composition of the CSR Committee,
- and CSR Policy and Projects approved by the Board;
- CSR policy.
- Transfer of unspent CSR amount to Fund specified by the Govt.: In case any company failed to spend the full CSR outlay for any financial year or any amount remained to be spent during the year, the unspent CSR amount, if any, shall be transferred by the company to any fund included in schedule VII of the Act.
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