New compliance as per Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021

Vide a notification dated January 22, 2021 the Ministry of Corporate Affairs (MCA) has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (“New Rules”).

As per the New Rules all relevant entities that undertake or intend to undertake any Corporate Social Responsibility (CSR) activity will have to register itself with the Central Government by filing a form CSR-1 electronically with the Registrar of Companies, with effect from April 1, 2021. Amongst others, these entities include registered public trusts, societies and section 8 companies of the Companies Act, 2013.

Amongst other aspects, the New Rules require that companies that undertake CSR activities will have to share an impact assessment report for big CSR projects. They will also need to provide a carry forward and set off of CSR expenditure annual action plan for CSR and have the same approved by the Board of the Company every year.

Further, in an interesting development, in the event a company fails to spend the two percent (2%) of its net profits towards CSR, it will have to specify the reasons for not failure to do so. Further, unless the unspent amount relates to any ongoing project, transfer it to a government notified fund.