An Analysis Of The Recent Changes To India's CSR Framework -

To print this article, all you need is to be registered or login on Mondaq.com.

WHAT HAS CHANGED?

Corporates
CSR Governance	CFO certification on CSR fund disbursal and utilization. Frame a deeper, well defined and specific CSR policy. Broader roles and responsibilities of CSR Committees, including formulating an annual action plan.
CSR Spends	Consolidates erstwhile clarifications on excluded activities, while making exceptions for Covid-19 related R&D. Permission to acquire/create a capital asset, subject to such assets being owned by the NGO, project beneficiaries or a public authority. Administrative overheads continue to be subject to a cap of 5% of CSR spends, but it now excludes costs incurred directly on the project design, implementation, monitoring and evaluation.
Unspent CSR funds	Transfer to a specifically designated “Unspent CSR Account” or to a fund specified in Schedule VII of the Companies Act within prescribed timelines
Mandatory Impact Assessment	Companies spending above ₹ 10 crores on an average in the past three FYs are required to mandatorily undertake impact assessment of their projects which have an overlay of more than ₹1 crore. Impact assessment costs capped at lesser of Rs. 50 lakhs or 5% CSR spends.
International Organizations	Can now avail expertise of specified UN organizations for project design, monitoring and evaluation or capacity building of personnel.
NGOs
Mandatory CSR registration	With effect from April 1, 2021, all implementing agencies are required to apply for and obtain a unique CSR registration number.
Income Tax registrations	Mandatory for CSR implementing agencies (except those set up by the Government) to have registrations under Section 12A and Section 80G of the Income Tax Act.

1. BACKGROUND

The Government has, through three notifications, introduced
amendments (collectively, the
“Amendments“) to the provisions relating
to corporate social responsibility
(“CSR“) under the Companies Act, 2013
(the “Act“) and the Companies (Corporate
Social Responsibility) Rules, 2014 (“CSR
Rules“). This includes notification of previous
amendments introduced under the Companies (Amendment) Act, 2019 and
Companies (Amendment) Act, 2020. All the amendments are effective
January 22, 2021.

2. HOW DO THESE AMENDMENTS IMPACT CORPORATES?

2.1. Eligible CSR Spends

Excluded activities:
The Amendments consolidate the various FAQs and clarifications
issued by the Ministry of Corporate Affairs since 2014, when the
CSR provisions were operationalized as it relates to
activities/spends that are ineligible to be considered as CSR
spends. This covers activities in the normal course of business of
a company, those benefitting only its employees, political
contributions, sponsorship activities, fulfilment of statutory
obligations and activities undertaken outside India (except for
training of sports personnel representing a State/country at the
national/international level).
Covid-19 related permitted
activity in the normal course of business: A company
undertaking research and development into vaccine, medical device
and drugs related to Covid-19 is permitted to spend on such CSR
activities (even though such activity is in their normal course of
business) up to the financial year 2022-2023, provided separate
disclosures are made in the annual report and such research and
development is undertaken in collaboration with an institute
specified in Schedule VII of the Act.
Acquisition/Creation of a
capital asset: CSR funds can be utilized by a company
towards acquisition or creation of a capital asset, provided such
asset cannot be owned by the company. It must…