Corporate Social Responsibility ("CSR") has been an evolving subject in India for the past few years and the legal provisions in relation to CSR have also undergone multiple changes in the past few years, owing to the need for clarifications, to keep pace with the current scenarios and most importantly, to encourage businesses in India to contribute towards CSR.
Accordingly, from time to time, the Ministry of Corporate Affairs ("MCA") issues clarifications and FAQs on CSR related activities. Our previous legal update on CSR can be accessed here.
In continuation of our previous update, we have now summarized the latest circulars issued by the MCA along with the most recent FAQs released by the MCA with respect to CSR compliance in India. A gist of the clarifications and key FAQs issued by MCA are provided below:
1. Clarification in relation to the set-off of CSR contribution to PM CARES Fund made on March 31, 2020:
On March 30, 2020, the MCA made an appeal to the MDs/CEOs of top 1000 companies in terms of market capitalization ("MCA Appeal") to contribute generously to "Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund" ("PM CARES Fund") in view the spread of COVID-19 in India. The appeal provided that such contribution could include: (a) previously unspent CSR amount, if any, and (b) amount over and above the minimum prescribed CSR amount for FY 2019-20 (which could be set-off against the CSR obligation arising in subsequent financial years). The MCA has subsequently issued a circular dated May 20, 2021 ("May Circular") clarifying the ability of companies that have made contributions to the PM Cares Fund in excess of the mandated minimum amounts of CSR expenditure for the financial year ending on March 31, 2020 to set-off such excess contributed amounts from their future CSR obligations.
The clarification can be viewed here.
2. Utilization of CSR funds for COVID-19 vaccination for employees and their families:
On July 30, 2021, the MCA clarified that spending of CSR funds for COVID-19 vaccinations for persons other than employees of the company and their family members would be eligible as a CSR activity. This would mean that amounts spent by companies in connection with vaccination drives conducted only for their employees and their family members would not be considered as expenditure towards CSR. Please also refer to S. No. 7 of the table below.
The clarification can be viewed here.
3. FAQs on CSR compliance in India
The MCA had received several queries and representations from stakeholders seeking clarifications on various recent developments to the CSR framework in India, pursuant to the amendments to Section 135 of the Act as well as to the Companies (Corporate Social Responsibility) Rules, 2014 ("CSR Rules") effected on January 22, 2021 ("January 22 Amendment").
To this end, on August 25, 2021, the MCA issued certain frequently asked questions (or FAQs) providing clarifications to certain of the queries and representations received by it regarding the amended CSR framework ("FAQs"). These FAQs have been issued in supersession of the clarifications and FAQs previously issued by the MCA, as listed below:
- MCA General Circular No. 14/2014 dated June 18, 2014;
- MCA General Circular No. 36/2014 dated September 17, 2014;
- MCA General Circular No. 1/2016 dated January 12, 2016;
- MCA General Circular No. 5/2016 dated May 16, 2016; and
- MCA General Circular No. 6/2018 dated May 28, 2018.
The key clarifications provided under the FAQs are detailed below. The detailed FAQs can be accessed here.
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