Government amends rules governing corporate social responsibility

The government has asked companies whose corporate social responsibility accounts have not spent any amount, to constitute a CSR committee.

To this effect, the government has amended the rules governing Corporate Social Responsibility (CSR), according to an official notification issued by the Ministry of Corporate Affairs.

Under the Companies Act, 2013, certain classes of for-profit companies are required to spend at least 2 per cent of their average net profit for the last three financial years on CSR activities in a particular financial year.

Mukul Sharma, partner, Cyril Amarchand Mangaldas, said the amendments also modified the format of the annual report on CSR activities to be included in the board’s report.

Under CSR rules, the unspent balance in a financial year relating to an ongoing project as well as any unutilized surplus arising out of CSR activities is required to be deposited by the company in a special bank account called ‘Unspent Corporate Social Responsibility Account’. Is. ,

The amended rules now provide that a company has to comply with CSR-related obligations, including constitution of a CSR committee, as long as there is no unspent amount in its unspent Corporate Social Responsibility account.

Prior to the amendment, the CSR rules limited the expense of impact assessment, which could be counted towards CSR obligations of a company, to 5 per cent of its CSR expenditure or Rs 50 lakh, whichever is lower.

Sharma said this limit has now been increased to 2 per cent or Rs 50 lakh, which will enable companies to conduct comprehensive impact assessment for large scale CSR projects and account for their CSR liability.

In addition, the government has released a new format for the annual report on CSR activities to be included in the Board’s report for the financial year commencing on or after April, 2020.

Under the draft, the composition of the CSR committee requires companies to provide an executive summary along with a weblink of impact assessment of CSR projects.

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Further, it requires the companies concerned to provide details about the ongoing projects and the CSR amount spent on projects other than ongoing.

Other requirements include disclosure of the structure of the CSR Committee, CSR Policy and CSR projects approved by the Board on the website of the Company.

Companies with a net worth of at least Rs 500 crore or a minimum turnover of Rs 1,000 crore or a net profit of Rs 5 crore or more during the immediately preceding financial year have to spend on CSR activities.

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