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MCA: Submission highlighting obligations prescribed under the Companies (CSR) Amendment Rules 2021

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The Ministry of Corporate Affairs (MCA) notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (CSR Amendment Rules) on January 22, 2021, bringing in several key changes including making CSR compliance mandatory, undertaking impact assessment through independent agency, creation or acquisition of capital assets, etc. Further, Frequently Asked Questions (FAQs) on CSR were also released vide General Circular No. 14 /2021 dated 25th August 2021.

While some of the issues highlighted by NASSCOM in our earlier representation were clarified by MCA through the FAQs, we have made a submission again on October 25, 2021 to highlight the following issues which require intervention of the MCA:

Rule 8(3): CSR reporting: Impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR

Impact assessment reports are detailed reports containing micro-level details about each project and its impact, and may run into several pages. Hence, an option can be provided to Companies wherein they give project wise summary containing some key mandatory information in the annual report and the link for accessing detailed IA can be provided on the website of the company.

Suggestion: Companies should be allowed to provide web link to access impact assessment reports on the website of the Company.

Rule 4(5): CSR Implementation: The Board shall satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved by it

CSR committee is a specialised committee of the Board and is responsible for planning, implementation, disbursement and end-use of CSR spend. Casting responsibility of CSR implementation directly on the Board would render the project operations inflexible and would create additional pressure on the Board.

Suggestion: CSR Annual Plan should be kept for perusal of CSR committee, rather than directly under the Board. The responsibility to oversee implementation of CSR activities and approval of CSR annual plan should be casted upon the CSR Committee, instead of the Board of Directors.

Section 135(6)- Relaxation in time period for spending the unspent CSR amount 

Potential CSR projects undergo multiple screening and extensive monitoring before finalisation. Many times, companies are unable to find suitable projects for large scale deployment. Imposing short time limits for compliance may lead to misuse of funds. Further, certain projects may take years to complete. In some cases, utilisation may take unexpectedly more time due to factors beyond a Company’s control.

Suggestion: The time period for utilisation of unspent CSR amount be increased from 3 years to at least 5 years.

A positive response on the above issues will provide clarity and will facilitate ease of doing business for the Industry.

We will keep you posted on further developments in this regard.