Govt overhauls corporate social responsibility rules

In a significant overhaul of the Corporate Social Responsibility (CSR) Rules, the Corporate Affairs Ministry (MCA) has introduced several changes to the CSR framework including mandating Impact Assessment for big CSR projects and revamping the reporting formats of the Board report.

The other major changes include mandatory disclosure of all CSR projects and activities besides CSR Committee's composition on the company’s website.

In what could be a pause for India Inc, the revamped rules—originally framed in 2014– allow CSR activities to be carried through charitable trusts.

It may be recalled that there was a proposal to restrict the CSR activities to be undertaken only by the Section 8 companies registered with the central government and not allow companies to fulfil their CSR obligations through charitable institutions. Now, this proposal has been dropped and is not reflected in the latest amendment to the Rules, experts said.

The MCA has also now stipulated that an Annual action plan for CSR has to be presented to the company Board for its approval,

Besides new stipulations on the capital assets acquired through CSR funds, the amended Rules also provide the transfer of the unspent amount to government notified fund. Several new norms have been introduced for carrying forward and set off of unspent CSR expenditure. Also, all CSR projects have to be mandatorily registered from April 1 in new Form CSR-1, the MCA has said.

Harish Kumar, Partner, L&L Partners, said that the latest changes follows the earlier recommendations made by MCA to set up High-Level Committee on CSR.

Aseem Chawla, Managing Partner, ASC Legal said: “Though one may view these new norms as compliance overreach, however in the overall scheme of things where still thrift and societal contributions are not very prevalent, this be viewed as a welcome move”.