Corporate Social Responsibility

Context: The Corporate Affairs Ministry has amended the rules for Corporate Social Responsibility (CSR) expenditure by Indian companies.

Some of the key changes.

• The Corporate Affairs Ministry has amended the rules for Corporate Social Responsibility (CSR) expenditure by India Inc to allow companies to undertake multi-year projects.
• It also require that all CSR implementing agencies be registered with the government.

CSR:

• All companies with a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more, are required to spend 2 per cent of their average profits of the previous three years on CSR activities every year.
• The amended CSR rules allow companies to set off CSR expenditure above the required 2 per cent expenditure in any fiscal year against required expenditure for up to three financial years.

What are the changes required for implementing agencies?

• A large number of companies conduct CSR expenditure through implementing agencies, but the new amendment restricts companies from authorizing either a Section 8 company or a registered public charitable trust to conduct CSR projects on their behalf.
  • A Section 8 company is a company registered with the purpose of promoting charitable causes, applies profits to promoting its objectives and is prohibited from distributing dividends to shareholders.
• The change would impact CSR programmes of a number of large Indian companies that conduct projects through private trusts.
• Change would mean such private trusts would either have to be converted to registered public trusts, or stop acting as CSR implementing agencies “given that a sizeable amount of CSR is being contributed through their private trusts by many companies, including blue-chip companies.”

What are other key changes?

• The amended rules require that any corporation with a CSR obligation of Rs 10 crore or more for the three preceding financial years would be required to hire an independent agency to conduct impact assessment of all of their project with outlays of Rs 1 crore or more.
• Companies will be allowed to count 5 per cent of the CSR expenditure for the year up to Rs 50 lakh on impact assessment towards CSR expenditure.

https://indianexpress.com/article/explained/corporate-social-responsibility-csr-rules-indian-companies-7163098/