CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY AMENDMENT RULES,2021
Ministry of Corporate Affairs (MCA) has introduced new Corporate Social Responsibility (CSR) rules which is known as Companies Corporate Social Responsibility Policy Amendment Rules,2021.
Official Gazette has published Companies CSR Policy Amendment rules came into on 22nd January 2021. These Amended rules are applicable on the Financial year 2020-21.
Before the inclusive definition of CSR was present in the Act. Currently, the inclusive definition has been amended as Executive definition and such Exclusive definition clearly states the activities which is not considered as CSR. CSR means the activity undertaken by the company u/s 135 read with these rules.
LIST OF ACTIVITIES NOT CONSIDERED AS CSR:
a.Normal Course of Business
Activities are undertaken in pursuance of the normal course of business of the company.
However, at this point, MCA has exempted the Companies engaged in the research and development activity of the new vaccine, drugs, and medical device related to the COVID 19 for the f.y. 2020-21, 2021-22, 2022-23 subject to certain conditions.
b. Outside India Activity
Any activity is undertaken by the company outside India (except for the training of the Indian sports personnel representing any State or Union territory at the national level or India at International level);
c. Political contribution
Contribution of any amount directly or indirectly to any political party under section 182 of the Act.
d.Benefit of Employee
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);
e. A benefit to its product
Activities supported by the companies on a sponsorship basis for deriving marketing benefits for their products or services
f. Other obligation in Law
Activities carried out for the fulfillment of any other statutory obligations under any law in force in India
HIGHLIGHTS OF CORPORATE SOCIAL RESPONSIBILITY(CSR):
1. Entities undertaking CSR activity to Share information
Every entity undertaking CSR activity has to share the details related to impact Assessment for big CSR projects, carry forward and set off of CSR expenditure, an annual action plan for CSR by Board every year in addition to CSR policy, Tweaks in reporting formats of Board Report, Mandatory disclosure of CSR projects and activities on the company website, Capital Asset acquisition and it's holding restricted to three bodies broadly, and Transfer of the unspent amount to government notified fund.
2. Entities to specify the reasons for failure to spend the earmarked 2% of net profits towards CSR
All companies with a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more, are required to spend 2% of their average profits of the previous three years on CSR activities every year. As per the new rules if the company fails to spend the earmarked two percent of net profits towards CSR, it will have to specify the reasons for not spending the amount and, unless the unspent amount relates to any ongoing project, transfer it to a government notified fund. Companies may also engage international organizations for designing, monitoring, and evaluation of the CSR projects or programs as per their CSR policy as well as for the capacity building of their own personnel for CSR.
3. Compulsory registration with MCA by filing Form CSR-1 electronically
As per the new provisions, every entity that intends to undertake any CSR activity will have to register itself with the Central Government by filing the form CSR-1 electronically with the Registrar of Companies, with effect from April 1, 2021. It is a one-time registration in a simple single-page form where details of the members, PAN number etc. has to be provided which can help us identify the implementing agencies on the MCA21 portal. Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally. On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically.
4. Entities with CSR obligation of Rs 10 crore or more to hire an independent agency The amended rules require that any corporation with a CSR obligation of Rs 10 crore or more for the three preceding financial years would be required to hire an independent agency to conduct an impact assessment of all of their project with outlays of Rs 1 crore or more. Companies will be allowed to count 5% of the CSR expenditure for the year up to Rs 50 lakh on impact assessment towards CSR expenditure.
5. Activities included in CSR The activities undertaken by entities in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in Companies (CSR Policy) Amendment Rules, 2021. Activities undertaken in pursuance of the normal course of business of the 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.
6. Activities excluded from CSR The activities undertaken in pursuance of the normal course of business of the company, any activity is undertaken by the company outside India, the contribution of any amount directly or indirectly to any political party under section 182 of the Act; activities benefiting 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, and activities carried out for fulfillment of any other statutory obligations under any law in force in India, are not included in the CSR Activities.
7. CSR Expenditure The board shall ensure that the administrative overheads shall not exceed 5% of the 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 and shall be plowed back into the same project or transferred to the Unspent CSR Account, and spent in pursuance of CSR policy and annual action plan of the company within six months of the expiry of the financial year
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