The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, were implemented by the Government of India on January 22, 2021, and the Companies (Corporate Social Responsibility Policy) Regulations, 2014, were changed.

 Rule 2 (Section 135)

Corporate Social Responsibility (CSR) is a term used to describe Rule 2. The Amendment modifies the definition of CSR to include an exception to activities that do not fall under the purview of CSR and are undertaken in the normal course of the company’s business, namely, any company engaged in research and development activity of new vaccine, drugs, and medical devices in their normal course of business may engage in research and development activity of new vaccine, drugs, and medical devices.

 Rule 4 (Section 8)

The Amendment modifies Rule 4, that is, CSR implementation and states that a Company can undertake CSR activities directly or through any of the following entities: 

(a) a company incorporated under Section 8 of the Act; 

(b) a registered public trust; 

(c) a registered society under Sections 12A and 80G of the Income Tax Act, 1961;

(d) any entity established under an Act of Parliament or a State legislature; or 

(e) any company incorporated under Section 8 of the Act, registered public trust. 

It also states that any entity that wants to engage in CSR activities must register with the Central Government. On April 1, 2021, these entities must electronically file the CSR-1 Form with the Registrar of Companies. 

According to the Amendment, the Board of Directors of a firm must be satisfied that the money issued has been used for the purposes and in the manner approved by the Board, and the Chief Financial Officer or the person responsible for financial management must attest to that effect.

 Rule 5

As per Rule 5, the Amendment states that the CSR Committee must develop and recommend an annual action plan following its CSR policy to the Board, provided that the Board may change the plan at any point throughout the fiscal year, based on a valid cause.

 Rule 7

The Amendment states that any surplus arising from CSR activities shall not be included in a company’s business profit and shall be reinvested in the same project, transferred to the Unspent CSR Account and spent under the company’s CSR policy and annual action plan, or transferred to a Fund specified in Schedule VII, within six months of the end of the fiscal year.

The Amendment provides that companies may set off CSR expenditure in excess of the required 2% in any fiscal year against the required expenditure for up to three fiscal years, subject to the following conditions:

– the excess amount available for set-off shall not be included as the surplus arising from CSR activities.

– The company’s Board of directors must approve the resolution.

 Rule 9

The Amendment updates the CSR reporting method to include the Board’s annual CSR report. In the event of a foreign firm, the balance statement prepared under Section 381 of the Act must include an annual report on CSR that includes the information stated in Annexure I or Annexure II. Every company with an average CSR obligation of ten crore rupees or more in the three immediately preceding fiscal years, under Section 135 of the Act, must conduct an impact assessment, through an independent agency, of their CSR projects with outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study. The impact assessment reports will be presented to the Board and appended to the annual CSR report.