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Corporate Social Responsibility for companies has been
governed through the provisions of Companies Act, 2013, which came into effect
since 1st April 2014. Section 135 of the Act prescribes the rules
for implementation of the provisions concerning CSR and the Companies
(Corporate Social Responsibility Policy) Rules, 2014. This notification was brought
on 27th February 2014 and came into effect since 1st April
Section 135 was amended by the Companies (Amendment) Act, 2019 which dealt with the CSR (Corporate Social Responsibility). The President gave assent for the Companies (Amendment) Act, 2019, which was published in Official Gazette on 31st July 2019. For operating Companies (Amendment) Act, 2019, the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 has been drafted along with all the amendments in the Companies (CSR Policy) Rules, 2014.
Public comments are, therefore, solicited on the draft Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020. The MCA has drafted Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 which may be accessed at the web link and suggestions are submitted online therein by the end of business hours till 28th March 2020. Stakeholders are requested to note down that the comments should be sent only through the web link created for this purpose. One must not send it separately through e-mail or any hard copy.
Table of Contents
The Draft rule has defined the term CSR more elaborately by an inclusive definition and with a few exclusions:
While the existing rules provide a blanket ban on the expenditure for the benefit only for the employees of the company and their families to be considered as CSR Expenditure, the amended Rule prescribes a threshold up to which such expenditure can be considered as CSR expenditure and if the threshold is exceeded then such expenditure will not be covered as CSR Expenditure. Only such activities which cover less than 25% of its employees as its beneficiaries will be covered as CSR activity as per the revised rules.
Also, Read: Applicability of CSR Under Companies Act 2013.
The Draft Rules define CSR Policy as follows:
This definition is more elaborate than the earlier
definition and explicitly mentions what should be covered under CSR policy and
how should the CSR Policy be made.
The draft rules have introduced a new definition of INTERNATIONAL ORGANISATION as under:
Except for the change in Clause numbering from 2(f) of the Old Rules to Clause 2(g) in Draft Rules, there is no change in the Definition of Net Profit.
Two new definitions have been added as follows:
The existing Corporate Social Responsibility framework splits responsibility of implementation and monitoring of projects between the CSR committee and the board of directors. It requires the board to specify reasons for not spending the required amount under CSR. The MCA has sought increased involvement of the board by proposing that:
The existing Corporate Social Responsibility rules specify
that any surplus generated by a company through its CSR activities will not be
considered as business profit. The existing rules, however, were silent on
treatment assets generated by a company through CSR funds. To address this, the
MCA has proposed that:
The activities involving usage of Corporate Social Responsibility funds only for the benefit of its employees or their relatives isn’t considered a CSR activity under existing rules. The MCA has now proposed a relaxation in this requirement, according to which CSR amounts spent by a company in activities benefiting its employees would be deemed to be a Corporate Social Responsibility activity if certain conditions are met. Such beneficiaries must not be more than twenty-five per cent of the company’s headcount. The ministry has set a deadline of March 28 for public comments on the proposed rules.
More Reading: Companies may be Penalized For not Meeting CSR Rules.
Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.
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