The Ministry of Corporate Affairs (MCA) notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 which seeks to amend the Companies (Corporate Social Responsibility Policy) Rules, 2014.
The amendment said that every entity, who 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 1 April 2021. However, this will not affect the CSR projects or programs approved prior to 1 April 2021.
As per the amendment the CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall include 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 as specified in sub-rule (1) of rule 4; the modalities of utilisation of funds and implementation schedules for the projects or programmes; monitoring and reporting mechanism for the projects or programmes; and details of need and impact assessment, if any, for the projects undertaken by the company.
The board shall ensure that the administrative overheads shall not exceed five percent of total CSR expenditure of the company for the financial year.
However, any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy and 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.
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.
“Until a fund is specified in Schedule VII for the purposes of sub-section (5) and (6) of section 135 of the Act, the unspent CSR amount, if any, shall be transferred by the company to any fund included in schedule VII of the Act,” the MCA notified.
With this amendment, the Companies will not only have to specify the reasons for not spending the amount for CSR, but also have 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.
The notification came into force from 22 January, 2021.
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