AMENDMENT: Administration of CSR

According to Rule 4(2) of the Companies (Corporate Social Responsiblilty Policy) Rules 2014 as discussed earlier here:

“The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through a registered trust or a registered society or a company established by the company or its holding or subsidiary or associate company under section 8 of the Act or otherwise:

Provided that—

(i) if such trust, society or company is not established by the company or its holding or subsidiary or associate company, it shall have an established track record of three years in undertaking similar programs or projects;

(ii) the company has specified the project or programs to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism.”

Now, Ministry of Corporate Affairs came out with the Companies (Corporate Social Responsiblity Policy) Rules 2015 dated 19^th January 2015. These amendments shall come into effect from date of publication. After these amendments above mentioned sub – rule (2) of Rule 4 shall be as under:

“The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through a registered trust or a registered society or a company (established by the company or its holding or subsidiary or associate company under section 8 of the Act or otherwise) established under Section 8 of the Act by the company, either single or along with its holding or subsidiary or associate company, or along with any other company or holding or subsidiary or associate company of such other company or otherwise:

Provided that—

(i) if such trust, society or company is (not established by the company or its holding or subsidiary or associate company, it) not established by the company, either singly or alongwith  its holding or subsidiary or associate company or alongwith any other company or holding or subsidiary or assiociate company of such other company, it shall have an established track record of three years in undertaking similar programs or projects;

(ii) the company has specified the project or programs to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism.”

These rules after amendment give power to the Board of a company that it may decide to undertake its CSR activities approved by the CSR committee, through:

(i)           a registered trust; or

(ii)          a registered society; or

(iii)         a company established under Section 8 of the Act

established by the company either singly or along with its holding or subsidiary or associate company or along with any other company either singly or along with its holding or subsidiary or associate company of that other company ; or

(iv)         otherwise

Here is an small issue, these trust or society or section 8 company can be established only with one other company and along with its holding or subsidiary or associate company of that other company only not any other company. In general interpretation, the term company include its plural but terms of this rule may require more clarification.

This further also require attention of Ministry of corporate Affairs that there amendment rules inadvertently deleted “it” form the first proviso.

The Term ‘may’ convey that the Board may decide to undertake such CSR activities directly using own resources of the company.

This is not compulsory for a company to establish a trust or society or section 8 company for undertaking CSR activities. Any trust or society or Section 8 company with a track record of three years in undertaking similar programs or projects may also be utilised. In such case, the company shall specify the project or programs to be undertaken through these entities, the modalities of utilisation of funds on such projects and programs and the monitoring and reporting mechanism.

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