2019 Amendment To Companies Act 2013 Provisions Relating To Corporate Social Responsibility Comes Into Force; CSR Rules Amended

The provisions of 2019 Amendment to Companies Act, 2013, relating to Corporate Social Responsibility have come into force today.

The Ministry of Corporate Affairs has issued a notification in this regard today appointing the 22nd day of January, 2021 as the date on which the provisions of section 21 of the 2019 Amendment Act shall come into force.  Companies (Corporate Social Responsibility Policy) Rules, 2014, have

Sections 2,11,25,27,53,55,58,59,60,62,64, 65, Clause (c) of section 18 and Clause (ii) of section 22 of Companies (Amendment) Act, 2020, have also come into force. Last month, many other provisions of 2020 Amendment were brought into force.

Section 21 of the 2019 Amendment Act, amends Section 135 of the Companies Act by modifying Clause 5 as follows (Changes underlined):

(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy: Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities: Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.

With this amendment, the Companies will not only have to specify the reasons for not spending the amount for CSR, but also have to transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year (Unless the unspent amount relates to any ongoing project referred to in sub-section (6)). The amendment also inserts the following Clauses:

(6) Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.

(7) If a company contravenes the provisions of sub-section (5) or sub-section (6), the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of such company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

(8) The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions

To know more about 2019 Amendment Act, Read: Key Highlights Of The Companies (Amendment) Act, 2019.

Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, modifies the Rules regarding CSR Implementation, CSR Expenditure, CSR Reporting. It also adds provisions for Display of CSR activities on website and Transfer of unspent CSR amount. 

Click here to Read/Download CSR Amendment Rules 2021