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Centre announces Amendments on Corporate Social Responsibility Rules
The Ministry of Corporate Affairs has issued a notification which announces certain amendments made by the Government of India in the rules governing corporate social responsibility (CSR). This has been named the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022.
Companies to set up CSR Committee
According to this, the government orders companies having any amount in their ‘unspent corporate social responsibility account’ to set up a CSR Committee, which will oversee their implementations in CSR. These companies may keep the unspent amounts dedicated for CSR activities in the abovementioned account but they must use the same within three financial years. The task of the CSR committee is to oversee whether this amount is being utilized properly.
Companies Act, 2013
According to the Companies Act, 2013, certain (profit-making) companies are expected to spend at least 2 per cent of their average net profit of the preceding three financial years on CSR activities in a particular financial year. As per the policy, the Board of Directors will have to make sure that the company spends in every financial year, minimum of 2% of the average net profits made during the three immediately preceding financial years.
Mandatory impact assessment
The ministry has also made modifications regarding how companies can calculate the expenditure towards conducting an impact assessment, which is mandatory for any business having a CSR fund of or above Rs 10 crore and for projects having an expenditure of or above 1 crore.
As per the law, companies spending big on CSR will have to carry out an independent impact assessment of the related activities. This will help them and the investors to understand the impact of their social investments, and accordingly their can plan further CSR projects.
New format for Annual CSR report
Companies will have to make their annual report on CSR activities in a new format released by the government. According to this format, the Annual report on CSR activities must be included in the board’s report for the Financial Year starting on or after the 1st of April, 2020.
The company must provide a brief outline of their CSR Policy and composition of CSR Committee (mentioning the name of the director, designation, Number of meetings of CSR Committee held during the year and Number of meetings of CSR Committee attended during the year).
The company must provide web-links where Composition of CSR Committee, CSR Policy and CSR Projects approved by the board are disclosed on the website of the company. They will also provide the executive summary along with web-links of Impact Assessment of CSR Projects carried out.
Details of CSR amount spent or unspent for the FY
Apart from this, companies will also have to provide details about the CSR amount spent or unspent for the Financial Year for ongoing projects and those other than ongoing projects; particulars of excess amount for set-off if any, and provide details of the Unspent Corporate Social Responsibility amount for the preceding three Financial Years.
The company must mention whether any capital assets have been created or acquired through their Corporate Social Responsibility amount spent in the Financial Year, if yes how many.
Explain failure to spend for CSR
The company must also specify the reasons, if it has failed to spend two per cent of the average net profit of three immediately preceding financial years.