Corporate Social Responsibility and Recent Amendments in CSR Rules.
This
Blog is authored by Avinash Srivastava. The author is a first year LL. B
student of Bharati Vidyapeeth, New Law College, Pune. This Blog provides an
overview of the initiatives undertaken by the companies towards the development
of society, and the laws governing the CSR activities of the companies. The blog
also provides information about the recent amendments made by the government in
the rules that govern the CSR activities of the companies.
Corporate Social Responsibility (CSR) refers to the
voluntary initiatives undertaken by companies to contribute to social,
environmental, and economic development, beyond their legal obligations.
Provisions Governing CSR in India
Section 135 of Companies Act, 2013 deals with Corporate
Social Responsibility and lays down the qualifying criteria based on net worth,
turnover and net profit for companies which are required to undertake CSR
activities. The activities, which may be included by the companies in their CSR
policies, are listed in Schedule VII of the Act. The company under this section
also includes the State Public Sector Enterprises.
Section 135(5) of the Companies Act, 2013 makes it mandatory
for any Company to spend annually at least two per cent of average net profit
of three immediately preceding financial years (calculated under Section 198 of
the Companies Act, 2013).
The CSR applies to companies that meet the following financial
threshold –
· Annual
Turnover 1000 crore rupees or more.
· Net
worth of at least 500 crore rupees or more.
· Net
profit of 5 crore rupees or more.
The CSR committee of the eligible companies takes the responsibility
to formulate and present the annual CSR strategy for the board’s approval. The
committee also oversees the proper implementation of the company’s CSR policy
to ensure that the company’s CSR activities are in accordance with the rules.
Recent Amendments in CSR Rules
The Companies (CSR) Rule, 2014 outlines the Foundational
Framework for CSR. On September 20, 2022, The Ministry of Corporate Affairs (MCA)
made certain Amendments to these rules, to Strengthen the CSR regulatory
framework.
The Following are the key Changes made by the amendments –
·
Creation of CSR committee is made mandatory for
all companies once they meet any of the financial threshold, now it is
immaterial that if the company fell below the eligibility criteria in future, it
must maintain the CSR committee.
·
The requirement for expenditure for Impact
assessment of the company’s CSR activities has been changed –
Earlier, the maximum a company could spend
on impact assessment was the 5% of total CSR spend or Rs. 50 lakhs whichever is
lower.
Now, the maximum a company can spend is 2%
of the total CSR spend or RS. 50 lakhs whichever is higher.
·
Companies are now required to provide detailed
information about their CSR Policy and regarding their CSR committee’s members along
with an executive summary of their CSR activities on their official website.
·
Companies are also required to fill in a CSR
activity Report containing the description of their CSR policy and detailed information
about the CSR committee members in their annual report. The report must include the description of the allocation of funds to various CSR projects, giving details about surplus
funds if available for offsetting and the unspent CSR amounts from the last 3 fiscal years. The report must contain a direct link to the company’s
website.
·
The Ministry of Corporate Affairs has introduced
Form CSR-2 which the eligible companies for CSR are required to fill in. The
new form requires a more detailed reporting, including –
- Information
about the company’s CSR Committee.
- Information on Company's CSR expenditure for last 3 preceding years, and of ongoing projects.
- Details on company's financial position for the preceding years.
- Mandatory disclosure of CSR policy of the company on its official website, as required by Rule 9 of the Companies
(CSR Policy) Rules, 2014.
- Details on any capital assets created or acquired through CSR funds, including the
location, pin code, amount spent, and the registered owner of the
property.
Conclusion
The corporate social responsibility of
the companies plays a very vital role in the overall community development of society.
The recent amendments made by the government ensure that the companies adhere
with the rules for proper implementation of CSR policy and maintain the
required accountability & transparency in the CSR initiatives.
References:
https://www.indiafilings.com/learn/key-changes-to-indias-csr-policy-for-companies/
Comments
Post a Comment