Ministry keeps new CSR amendments on hold

Corporate India may have cause for cheer as regards the proposed onerous CSR provisions. This is because the Corporate Affairs Ministry (MCA) has refrained from putting into effect the controversial CSR amendments in the recently enacted Companies (amendment) Act 2019 while going ahead with implementation of all other provisions in the amendment law.

By keeping the implementation of Section 21 (amendments to the CSR provisions in Companies Act 2013) in abeyance, the government has restored status quo ante as regards CSR provisions, say company law experts.

This would mean that CSR for now would only be voluntary for corporate India and not spending the 2 per cent on CSR would not be treated as criminal offence, attracting jail term for company officials.

However, this position will only hold true till the time government takes a call on the recommendations of the high level panel on CSR headed by MCA Secretary Injeti Srinivas, it is learnt. It may be recalled that the Panel report was submitted to Finance Minister Nirmala Sitharaman after Parliament had passed the Companies (amendment) Bill 2019.

Indications are that the government may accept the recommendations in toto including the one to treat CSR non-compliance as civil offence.

It has two options if it wants to bring changes to the current CSR framework — bring comprehensive amendments in the next Parliament session or issue an ordinance for the amendments, if any. There is always the alternative of not disturbing the existing framework which covers CSR as only a voluntary activity.

MCA this past week notified several Sections of the recently enacted Companies (amendment) Act 2019 while leaving out the controversial provision on CSR.

Expert opinion

Commenting on the development, Aseem Chawla, Managing Partner, ASC Legal, a law firm, said this is suggestive that the proposed amendments on CSR are still being evaluated and re-considered. “It would be worthwhile if lawmakers can take a quick and firm view; now that enough feedback from all stakeholders is available and formalise a definitive view on CSR,” he said.

The availability of income tax benefits should be an important consideration, Chawla added.

Atul Pandey, Partner, Khaitan & Co, a law firm, said, “Considering the Prime Minister’s recent appreciation for wealth creators, and given that the Finance Minister has been open to discussions with the industry on the proposed amendments introducing penalty provisions on CSR, it is expected that the government may revisit the penalty provisions pertaining to CSR again. However, it would be premature to say that the CSR may be made voluntary again, considering extensive discussions have already taken place in this regard. Rather, the government may arrive at a middle ground wherein companies may be provided an grace period for meeting their CSR obligations, before penalty provisions kick in”.