Ministry of Corporate Affairs brings amended CSR rules into effect; here's what changes

The Ministry of Corporate Affairs has released a new order notifying the amendments in the CSR rules for companies. It comes into effect starting today.
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The provisions of the 2019 Amendment to the Companies Act, 2013 pertaining to Corporate Social Responsibility (CSR) came into force on January 22.

"These rules may be called the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021," a gazetted order released by the Ministry of Corporate Affairs (MCA) of the Government of India stated.

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.

"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," MCA added.

Besides this, companies undertaking CSR activities will have to share:

  • Impact Assessment for big CSR projects
  • Carry forward and set off of CSR expenditure
  • 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 company website
  • Capital Asset acquisition and its holding restricted to three bodies broadly
  • Transfer of unspent amount to government notified fund
In the event of the company failing 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 organisations for designing, monitoring and evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity building of their own personnel for CSR," MCA stated in the order.

It added,"Any surplus arising out of the CSR activities shall not form part of the business profit and shall be ploughed 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."

Edited by Anju Narayanan

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