On 22^nd January 2021, the Ministry of Corporate Affairs updated the Companies Corporate Social Responsibility Rules. The amendments in the CSR law highlight significant changes to the already existing national CSR policy that includes an increased focus on impact assessment, decriminalisation of non-compliance, greater inclusion of international organizations, and provisions altering the guidelines for management of excess funds and surplus expenditures.

The following expenditure will now be included in the list of CSR activities as per the new amendments:

1. Research & development of new vaccines, medication, and medical devices related to COVID-19 in the firm’s normal course of business
2. Overseas training of Indian sports personnel representing any State or Union territory at national level or India at international level.

A company’s CSR Policy must include:

1. List of CSR projects that are approved to be undertaken
2. The manner of execution of such projects
3. The details of utilization of funds for the projects
4. Implementation schedules for the projects
5. Monitoring and reporting mechanism for the projects
6. Details of impact assessment, if any, for the projects undertaken by the company

Under the new rules, “Administrative Overheads” will only include expenses directly incurred by the company on “general management and administration” of CSR functions. Therefore, the expenses incurred by the company on designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project will not be included as part of the administrative overheads but as a CSR expenditure. Also, the board shall ensure that the administrative overheads shall not exceed five percent of total CSR expenditure of the company for the financial year.

A significant departure from the erstwhile CSR policy, non-compliance to the CSR rules and obligations will no longer be treated as a criminal offence. These will now be treated as civil wrongs.

Every company must disclose the following information publicly as per the CSR amendments:

1. Composition of the CSR Committee
2. The CSR Policy
3. Projects approved by the Board

Any surplus income being generated through a company’s CSR activities cannot form part of the company’s profit. The surplus shall be reinvested into the same project or shall be transferred to the Unspent CSR Account. Any CSR expenditure that exceeds the required amount can be carried forward to the next three years.

CSR funds may be spent on creating or acquiring capital assets. Although, these capital assets cannot be held by the company. They must be held by any one of the following entities:

1. A Section 8 company
2. A registered public Trust or Society having charitable objects
3. Beneficiaries of said projects
4. Public authorities

A Utilization Certificate must now be presented by the CFO to the Board, certifying that all the funds allocated by the Board have been utilized in a manner approved by the board.