MCA Proposes Amendments in CSR Rules-Invites Comments till 28th March 2020
The Ministry of Corporate Affairs (MCA) has published draft CSR Rules Amendments. There are many changes and developments that will impact India’s CSR ecosystem.
Here are a few key insights from the notification of Amendment in CSR Rules issued by Ministry of Corporate Affairs under the Companies Act Amendment Rule 2020, proposed on 13th March, 2020
Implementation of CSR projects:
(1) The Board shall ensure that the CSR activities are undertaken by the company itself or through:
(a) a company established under section 8 of the Act, or
(b) any entity established under an Act of Parliament or a State legislature.
Provided that such company/entity, covered under clause (a) or (b), shall register itself with the central government for undertaking any CSR activity by filing the e-form CSR-1, (Download) with the Registrar along with prescribed fee.
whereas the statement as per the points under currently applicable CSR rules in the Company’s ACT 2013 are:
(2) The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through
(a) a company established under section 8 of the Act or a registered trust or a registered society, established by the company, either singly or along with any other company, or
Or
(b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government or any entity established under an Act of Parliament or a State legislature:
Provided that if, the Board of a company decides to undertake its CSR activities through a company established under section 8 of the Act or a registered trust or a registered society, other than those specified in this sub-rule, such company or trust or society shall have an established track record of three years in undertaking similar programs or projects; and the company has specified the projects or programs to be undertaken, the modalities of utilisation of funds of such projects and programs and the monitoring and reporting mechanism”.
Inferences from the draft CSR Rules Amendments 2020:
Engagement of International Organizations in CSR projects
Another interesting point is that, the international organizations will not only be eligible in designing, monitoring and evaluation of CSR project and capacity building of its own CSR personnel but will also be allowed to directly implement CSR projects through direct funding by the company (subject to approval by Central Government)
Inference
The proposed statement by Ministry looks ambiguous as the section under implementing agencies mentioned above clearly states that CSR project can either be implemented by company itself, or by a section 8 company or an entity registered under Act of Parliament or a State legislature. How will the international organizations will become eligible in this case, will require clarity from MCA.
Formation of Unspent Corporate Social Responsibility Account by the Company (donor)
Unspent balance, if any, towards fulfilment of CSR obligation at the time of commencement of these Rules shall be transferred within a period of thirty days from the end of Financial Year 2020-21 to special account viz., ‘Unspent Corporate Social Responsibility Account’ opened by the company and shall be consumed within three years from the date of transfer.
National Unspent Corporate Social Responsibility Fund by Central Government
If the company fails to spend the unspent amount accumulated in its unspent CSR account within three years, then the unspent amount will have to be transferred to the National Unspent Corporate Social Responsibility Fund.
Transparent and Well-Structured CSR Reporting
Ownership of the Assets
The CSR amount may be spent by a company for creation or acquisition of assets which shall only be held by a company established under section 8 of the Act having charitable objects or a public authority.
The points which are unchanged from the previous law:
Download Full CSR Amendment Rules 2020
https://csrbox.org/media/Draft_CSR_Policy_Amendment_Rules_2020_by_MCA.pdf
Download Draft CSR Form 1
https://csrbox.org/media/Draft_CSR_Form1_by_MCA.pdf
Download Draft Format of Annual Report of CSR
https://csrbox.org/media/Draft_format_annual_report_CSR_Activities.pdf
For any query/suggestion on CSR and draft rules, please send us an email at shilpi@csrbox.org or you may directly login to the MCA portal
For full report, please click here
More Reports