Corporate Social Responsibilities Amendment Rules

Written by Saptaparni Raha, Lawyer

John has a company of software and IT Compliance. He wants to know about the new CSR rules. He comes to Shweta consultancy services to learn about the recent amendment.

Introduction

On January 22, 2021, the Companies (Amendment) Act 2020 was notified by the Ministry of Corporate Affairs. These amendments were revisions made on corporate social responsibilities, and on the same date, the new rules regarding corporate social obligations were referred to as Corporate Social Responsibility Amendment Rules 2022. This rule aims to transform the legislative framework that governs the monitoring and evaluation of CSR operations and the usage of CSR funds.

Amendments to Corporate Social Responsibilities Rules

In 2021, the amendment took place on Rules 12,4,7,8,9 and 10.

Rule 12: Definition

• Administrative overhead

Administrative overhead defines expenses that the company attracts for general management and administration of corporate social responsibility. Costs directly attracted to the design, implementation, or monitoring of a particular corporate social responsibility project or program shall not include administrative overhead.

• CSR Policy

According to the recommendations of the CSR committee, when a statement contains any approach and the directions provided by a company's board.

• International Organizations

According to section 3 of the United Nations (privileges and immunities) Act,1947, the central government shall notify an organization as an international organization.

• Ongoing projects

When a company undertakes any project to fulfil its CSR obligation, which does not exceed three years, known as an ongoing project, it shall exclude the financial year in which it commenced.

• Public Authority

The definition of public authority is defined in Clause (h) of Section 2 of the Right to Information Act,2005.

• CSR Committee

The CSR committee is defined under Section 135 of the Companies Act.

Rule 4

• A registered company, registered society, or public trust under sections 12A and 80 G of the income tax Act.

• The Central or State government established the registered society or public trust.

• When an entity is established under the Act of parliament or state legislature.

• When there is an established track record of at least three years in undertaking similar activities of any established company, registered society, or public trust.

• How will the project be executed?

• The Process of utilizing or implementing the funds for projects.

Rule 7

• If the company has an excess amount available for set-off, that shall not include the surplus.

• The board of committee shall pass the resolution to that effect.

• A company registered under section 8 shall spend the CSR by creating a capital asset. A registered public trust or society having charitable objects and a CSR registration number.

Rule 8

• If the company undertakes an impact assessment, it may book the expenditure towards Corporate Social Responsibility for that fiscal year. It shall not exceed 5% of the total CSR expenditure for that financial year or Rs.50 lakh rupees, whichever is less.

• The foreign company needs to include its annual report on CSR in its balance sheet.

Rule 9

• The composition of the CSR committee and CSR policy by the board of directors is mandatory to disclose.

Rule 10

• The CSR amount which has yet to be spent will transfer by the company yet to any fund included in schedule 7.

Conclusion

There are strict regulations made by the new corporate social responsibility rules and policies for CSR efforts. Companies need to keep all records of the committee and details of money allocations.

References

• Suchandra Mukherjee, Changes by the CSR Amendment Rules 2021 (iPleaders)

• IndiaFilings, Companies (CSR Policy) Amendment Rules, 2021 (IndiaFilings)
  

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