Certain amendments as contained in the Companies (Amendment) Act, 2019 and 2020 in regard to Corporate Social Responsibility (CSR) were notified with effect from 22.01.2021 and accordingly came into force from that date.
These amendments have brought into force significant changes in the CSR provisions.
Based on the above amendments, the Companies (Corporate Social Responsibility Policy) Rules, 2014 have also been amended with effect from 22.01.2021.
The key changes in CSR provisions effective 22nd Jan, 2021 are as under-
1. If the company fails to spend the prescribed CSR amount and such amount is not relating to an ongoing project, the company has to transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.
2. Any amount remaining unspent by a company, pursuant to any ongoing project undertaken by a company in pursuance of its CSR Policy, needs to be transferred by the company 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, and such amount shall be spent by the company in pursuance of its obligation towards the CSR Policy within a period of three 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.
The above implies that in either instance, whether the company has an on-going project or not, the company has to transfer the unspent amount to a Fund specified in Schedule VII to the Companies Act, 2013 or to a special account, as the case may be. The Funds specified in Schedule VII for the time include in Clean Ganga Fund, CARES Fund, PM National Relief Fund and Swachh Bharat Kosh.
3. CSR activities can be undertaken by the company itself or through Section 8 company/registered public trust/registered society, established either by the Company or Govt or through an entity established by statute. In all these cases the company itself / sec 8 company / entity which is undertaking CSR activity, is now required to register itself with the Central govt, by way of filing e-Form CSR-1 with the Registrar w.e.f. 01.04.2021.
4. If the company spends an amount in excess of the requirement, such company may set off such excess amount in succeeding three financial years.
5. Companies having an average CSR obligation of INR 10 crores or more in three immediately preceding financial years will be required to do impact assessment, through an independent agency of their CSR projects having outlays of INR 1 crore or more, and which have been completed not less than one year before undertaking the impact study.
6. Companies may now engage international organisations for designing, monitoring and evaluating the CSR projects and for capacity building of their personnel for CSR.
7. Administrative overheads have been defined and capped to 5% of total CSR expenditure.
8. The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.
9. If the amount to be spent does not exceed INR 50 lakh, the requirement for the constitution of CSR committee shall not be applicable.
10. The Penalties under the new provisions are as under-:
For non-compliance of point no. 1 or 2 as above, the company shall be liable to a penalty of twice the amount involved or Rs.1 crore, whichever is less and every officer of the Company who is in default shall be liable to a penalty of 1/10th of the amount involved or Rs. 2 lakhs, whichever is less.
11. These amendments have not been given retrospective effect and accordingly, in our view, these will have effect only from the date of notification, i.e. 22.01.2021.
