Spending CSR funds for COVID-19
Companies required to spend funds on CSR activities should consider supporting various activities related to COVID-19 under item numbers (i) and (xii) of Schedule VII. Companies may also contribute to recognized institutions for research related to COVID-19. Ministry of Corporate Affairs has also issued a Notification clarifying that CSR funds may be spent for COVID-19.
Clause (i) of Schedule VII covers: “promoting health care including preventive health care and sanitation”.
Thus, all projects or programs relating to activities promoting COVID-19 related health care, including COVID-19 related preventive health care and COVID-19 related sanitation would qualify as legitimate CSR activity under Schedule VII.
Clause (xii) of Schedule VII
Clause (xii) of Schedule VII covers: “disaster management, including relief, rehabilitation and reconstruction activities”
On March 14, 2020 India declared Covid-19 (coronavirus) as a “Notified Disaster” which would enable the country to provide assistance and spend more funds to fight the pandemic.
Thus, all projects, programs and activities revolving around COVID-19 management, including COVID-19 related relief and COVID-19 related rehabilitation would qualify as legitimate CSR activity under Schedule VII.
Schedule VII should be interpreted liberally
Ministry of Corporate Affairs in General Circular No. 21/2014 (No. 05/01/2014 – CSR) Dated: 18th June, 2014 clarifies: “The statutory provision and provisions of CSR Rules, 2014, is to ensure that while activities undertaken in pursuance of the CSR policy must be related to Schedule VII of the Companies Act 2013, the entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule”.
Supporting COVID-19 related research
Clause (ix) of Schedule VII covers: Contribution to National Laboratories and Autonomous Bodies (established under the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defense Research and Development Organization (DRDO), Department of Science and Technology (DST), Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).
Thus, contribution to recognized institutions for research in science and medicine related to COVID-19 would also qualify as legitimate CSR activity under Schedule VII.
Note of caution
However, companies (especially pharmaceutical companies) should note that under current applicable Rules: “CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.”
Thus, a company’s own Research & Development (R & D) program would be an activity undertaken in pursuance of its normal course of business and not qualify as CSR.