Increased compliance proposed under Companies (CSR Policy) Rule 2020

Ministry of Corporate Affairs (MCA) has drafted Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 and public comments are solicited online by end of business hours on 28th March, 2020. Under the proposed new Rules MCA has introduced several new compliances around planning, implementation, monitoring & evaluation, reporting and impact assessment of CSR activities. Here is what’s proposed under the new Rules …

Up to twenty-five per cent employees can be beneficiaries

It is proposed that CSR would include any activity having less than twenty five percent employees as its beneficiary. In other words, if in fulfillment of its CSR activity a company establishes a hospital or a day care center or a home for the aged, up to twenty five percent employees of the company can be beneficiaries of those institutions.

“Ongoing Project” defined

“Ongoing Project” shall mean a multi-year project undertaken by a Company in fulfillment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall also include such projects that were initially not approved as a multi-year project but whose duration has been extended beyond a year by the Board based on reasonable justification.

This amendment will allow companies to carry forward unspent CSR funds for ongoing projects which can have a timeframe of up to three years.

Implementing CSR

Under the proposed new Rules, the Board shall ensure that the CSR activities are undertaken by the company itself or through:

Provided that such company/entity, covered under clause (a) or (b), shall register itself with the central government for undertaking any CSR activity by filing the e-form CSR-1 with the Registrar along with prescribed fee.

Any entity established under an Act of Parliament or a State legislature would include a public charitable trust or a society. However, any of these three entities wanting to carry out CSR activities as an implementing agency will be required to fill e-form CSR-1 with the Registrar of Companies and pay the prescribed fees.

CSR Monitoring & Evaluation

Under the new Rules, a company may engage international organizations for designing, monitoring and evaluation of the CSR projects or programs as per its CSR policy as well as for capacity building of their own personnel for CSR.

Provided that a company may also engage an International Organization for implementation of a CSR project subject to prior approval of the central government.

“International Organization” under the Rules means an organization notified by the Central Government as an International Organization under Section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply.”

CFO to certify CSR Report

Under the proposed new Rules, the Board of a company shall satisfy itself that the funds so disbursed have been utilized for the purpose and in the manner as approved by it and Chief Financial Officer (CFO) or the person responsible for Financial Management shall certify to the effect.

Responsibility of Board to monitor implementation of ongoing project on time

In case of ongoing projects, the Board of a company shall monitor the implementation of the project with reference to the approved timelines and year wise allocation and shall be competent to make modifications, if any, for smooth implementation of the project within the overall permissible time period.

Monitoring, Reporting Need & Impact Assessment

The CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall also include monitoring and reporting mechanism for the projects or programs and details of Need and Impact Assessment, if any, undertaken by the company.

Factoring cost of Impact Assessment

The board shall ensure that the administrative overheads incurred shall not exceed five percent of total CSR expenditure of the company for the financial year. Provided that a company undertaking ‘Impact Assessment’ may incur administrative overheads not exceeding ten percent of total CSR expenditure for that financial year.

Surplus arising out of Projects

Any surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a company and shall be ploughed back into the same project or shall be transferred to the ‘Unspent CSR Account’ and spent in pursuance of CSR policy and action plan of the company.

Acquisition of Assets

CSR funds may be spent by a company for creation or acquisition of assets which shall only be held by a company established under section 8 of the Act having charitable objects or a public authority.

Provided that any asset created by a company prior to the commencement of Companies (CSR Policy) Amendment Rules, 2020, shall within a period of One hundred and eighty days from such commencement comply with the requirement of this rule, which may be extended by a further period of not more than ninety days with the approval of the board based on reasonable justification.

This means any school, hospital, home for the elderly etc., established or acquired by a company in pursuance of its CSR activities must be held by a Section 8 company with charitable objects or a government authority.

Unspent CSR funds

Unspent balance, if any, towards fulfilment of CSR obligation at the time of commencement of these Rules shall be transferred within a period of thirty days from the end of Financial Year 2020-21 to a special account viz., ‘Unspent Corporate Social Responsibility Account’ opened by the company and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.

This amendment requires that a company should either fully spend the CSR funds during the fiscal year or transfer the unspent funds to a special designated account and spend it within a period of three years or failing which, transfer it to a specified fund listed under Schedule VII of the Indian Companies Act 2013.

Impact Assessment made mandatory

Companies having obligation of spending average CSR amount of Rs. 5 Crore or more shall undertake impact assessment for their CSR projects or programs, and shall disclose details of the same in its Annual Report on CSR.

Disclosure of policy & projects on website

The Board of Directors of the company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website for public viewing.

National Unspent CSR Fund

The Central Government shall establish a fund called the “National Unspent Corporate Social Responsibility Fund” which shall be utilized for the purposes of undertaking CSR projects in the in areas or subjects specified in schedule VII of the Act. Provided that until such fund is created the unspent CSR amount shall be transferred by the company to any fund as specified in schedule VII of the Act. The manner of administration, authority for administration of the Fund shall be in accordance with such guidelines as may be prescribed by the Central Government from time to time.

Companies which fail to spend their CSR funds even after carrying it forward for up to three years will be required to transfer such unspent funds to this National Unspent CSR Fund which will established and administered by the Central Government.

Format of Annual Reporting on CSR

The format for annual reporting on CSR activities has also undergone several changes.

Companies will now also be required to disclose the number of meetings of the CSR Committee held during the year and the number of meetings of CSR Committee attended during the year.

In addition, certain companies will be required to provide details of Impact Assessment of CSR projects carried out.

Companies will also be required to disclose total amount transferred to ‘Unspent CSR Account’ or to the ‘National Unspent CSR Fund’ including details of the amount and date of transfer.

In case of creation or acquisition of assets, companies will be required to furnish the details relating to the asset so created or acquired through CSR spend in the financial year including, date of creation/acquisition of the asset(s), amount of CSR expenditure for creation/acquisition of asset, details of the entity/public authority under whose name such asset is registered, address etc., details of the property or asset(s) created/acquired (including complete address and location of the property).

The Annual CSR Report should be signed by the Chief Executive Officer or Managing Director or Director as also the Chief Financial Officer.

Draft Rules & submission of comments

The draft Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 can be read or downloaded at:   

Comments/suggestions can be submitted at:


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