Corporate Social Responsibility Amendment Rules 2021

Everybody is well aware that the corporate world is on the boom. However, at the same time, it's being toxic not just for the environment but also affecting our daily social life. Considering this emerging issue, India has shown its inventiveness and introduced the concept of Corporate Social Responsibility (CSR) by altering section 135 of the Companies Act, 2013.

Accordingly, Companies (Corporate Social Responsibility) Rules, 2014 came into the picture, which signifies the moral duty of the corporate entity towards the society & conserving natural resources for the future generation. For the same, the corporate sector has to grant CSR funds & other support to different Non-profitable Organizations (NGOs) which works for this burning issue. Moving ahead with this notion, the Ministry of Corporate Affairs, India (MCA) has amended some rules in Jan. 2021. So, the present article shall only focus on the latest amendments, i.e., Corporate Social Responsibility Amendment Rules, 2021. Briefing on this subject, the writer will summarize all the amendments done this year and figure out future possibilities of this mechanism of ethics.

The objective behind CSR Amendment Rules, 2021

After only 7 years of its incorporation and immediately after the phase of pandemic, i.e., Covid-19, MCA decided to improvise these rules by revising section 135 of the Companies Act, 2020. The main kingpin behind this amendment is to tighten the knots of moral duty on corporate entities. Accordingly, the legislative framework is transmuted for monitoring CSR operations more effectively.

Synopsis of Corporate Social Responsibility Amendment Rules 2021

Attempting to achieve its motive, MCA has come forward with the following amendments:
1. All the entities engaged in CSR activities have to file a mandatory e-form, i.e., CSR-1 for generating a Unique Registration Number for identifying each of them; 

2. Using a digital platform, the Board of Directors (BOD) of all Companies are necessarily required to disclose all the information regarding CSR committee, policies, and projects on their official website for public access;

3. Each company which have an average CSR obligation of Rs. 10 cr. or more in 3 preceding years has to undergo an Impact Assessment conducted by an independent agency for their CSR projects reflecting an outlay of Rs. 1 cr.;

4. Board is also required to restrict its administrative overheads within 5% of total CSR expenditure of every year;

5. CSR amount spent on creating/ acquiring capital assets shall be restricted up to 3 entities only;

6. In any year, the CSR amount remains unspent, and then it has to be transferred back to the CSR account or funds like Clean Ganga, PM Cares & Disaster Management, etc. If surplus/profit is earned from the CSR project, it has to be spent on the same or transferred to the CSR account or above said funds. Next, excess spend of CSR fund has to be set off in consecutive 3 years as it can’t be used anywhere else;

7. CSR fund can’t be used on activities about sponsorship, political contribution, or normal course of business for employees benefit other than research & development for covid vaccine/medical devices/drugs (if separate accounts maintained). Further, in compliance of obligation performed outside India not related to the representation of sportsperson in national/ international game;

8. Not complying with detailed disclosure shall be considered as non-compliance, which lead to a monetary penalty on the default entity;

With the above glimpses of changes put forth in CSR Amendment Rules, 2021, MCA is taking this ethics management mechanism very seriously. As the evergreen truth of authority is ‘great power comes with great responsibility’ thus, while empowering the corporate domain, we should not ignore the significance of its socio-economic responsibilities. Taking it up as a positive initiative, it can be hoped that emerging companies will develop not just limelight development but also sustainable development.

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