With the objective of providing wider and clearer regulation for companies complying with Corporate Social Responsibility (“CSR”) norms under the Companies Act, 2013 (“CA2013”), Ministry of Corporate Affairs (“MCA”) has amended the Companies (Corporate Social Responsibility Policy) Rules, 2014 (“CSR Rules”). The amendments including following key changes:
The above changes have been analyzed below:
|Compliance with CSR norms – Amount lying in UCSRA||Under Section 135, any amount remaining unspent pursuant to any ongoing project, is required to be transferred by the company within a period of 30 days from the end of the financial year to UCSRA. Such amount shall be spent by the company in pursuance of its obligation towards the CSR Policy 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 30 days from the date of completion of the third financial year.
Now, as per the amendment, a company having any amount in its UCSRA is required to constitute a CSR Committee and comply with the provisions contained in Section 135 (2) to (6) of CA2013.
|Removal of exemption from complying with CSR norms given to certain companies which ceased to come within the purview of section 135||Every company which ceased to be a company covered under section 135(1) for three consecutive financial years was not required to:
(a) constitute a CSR Committee; and
(b) comply with the provisions contained in Section 135(2) to 135 (6), till such time it met the criteria specified in section 135(1).
Aforesaid exemption has been removed.
|Implementing agencies – Scope of entities clarified | Statutory entities clarified||Now, if a company wants to set up entities to carry out CSR or wish to carry out through other entities not set up by it, then such entities would need to be a company established under section 8 of CA2013, or a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 80G of the Income Tax Act, 1961.
Further, in the event of implementing agency being statutory body constituted under an Act of Parliament or State legislature, then such body needs to be one constituted to undertake activities covered in Schedule VII of CA2013.
|Impact assessment – change in CSR booking amount||A Company undertaking impact assessment may book the expenditure towards CSR for that financial year, which shall not exceed two percent (earlier “five percent”) of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is higher (earlier “whichever is less”).|
Additionally, the Annexure II of the CSR Rules which provides Format for the Annual Report on CSR Activities has been substituted with a new format and in the e-form CSR–1, serial number 1 and the entries relating thereto, the “1. Nature of the entity” serial number enlisting the entities through which CSR activities can be carried out by a company, has been substituted with a revised list.
The above amendment has been made vide Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022 dated September 20, 2022 (available here) and is effective from September 20, 2022.
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Manendra Singh, Associate Partner – ManendraSingh@elp-in.com ;
Tanvi Goyal, Principal Associate – TanviGoyal@elp-in.com;
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