The Companies (Corporate Social Responsibility Policy) Rules, 2014 governs the activities undertaken by a company[1] in pursuance of its statutory obligation of corporate social responsibility (“CSR”) as laid down in section 135 of the Companies Act, 2013 (“Act”). The Ministry of Corporate Affairs vide notification dated 20th September 2022 notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022 (“Rules”) and the same shall come into force on the date of their publication in the official gazette.
The pivotal amendments brought forth in the Rules are summarised as below –
1. A company having any amount in its Unspent Corporate Social Responsibility Account[2] (“Account”) shall comprise of a Corporate Social Responsibility (“CSR”) Committee to administer the utilisation of the amount transferred to the Account by the company, for compliance with its CSR obligations, within 3 financial years.
2. Every company eligible to comply with CSR obligations shall constitute a CSR Committee. The same shall be dissolved, if the company does not meet the criteria for that particular financial year, instead of the earlier provision of 3 consecutive financial years.
3. Companies may now additionally undertake CSR activities through the following additional entities, subject to certain conditionalities:
· Fund or institution established for charitable purposes;
· Trust (including any other legal obligation) or institution wholly for public religious purposes and/or charitable purposes:
· University or other educational institution existing solely for educational purposes and not for purposes of profit:
· Hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit.
However, the above-mentioned shall not include the following:
· University or other educational institution which (a) is wholly or substantially financed by the Government; or (b) whose aggregate annual receipts do not exceed five crore rupees; and
· Hospital or other institution (a) is wholly or substantially financed by the Government; or (b) whose aggregate annual receipts do not exceed five crore rupees.
4. Under the new regime, the maximum expenditure permitted for undertaking impact assessment towards CSR for a particular financial year by a company is 2% of the total CSR expenditure for that financial year or INR 50,00,000/-, whereas the earlier rule allowed up to 5% of the total CSR spending or INR 50,00,000/-, whichever was less.
5. A new format for the annual report on CSR activities (Annexure II), which is to be included in the board’s report for the financial year commencing on or after April 2020 has been provided. Under the new format, the composition of the CSR committee requires the companies to provide the executive summary along with the weblinks of impact assessment of CSR projects carried out.
The Rules are a witness of India’s steadfast journey towards infusing zeal in stakeholders towards the building of the nation and of setting a yardstick in securing sustainability goals.
[1] A company having net worth of INR 500 crore or more, or turnover of INR 1000 crore or more or a net profit of INR 500 crore or more during the immediately preceding financial year. [2] A special account opened by a company in a scheduled bank to transfer any amount, for a financial year, remaining unspent on an ongoing project undertaken by the company in pursuance of its CSR policy.