AMENDMENT: Administration of CSR

In a post earlier here, we discussed provisions of Section 135 read with rule 4 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 regarding Administration of Corporate Social Responsibility Policy. Sub – rule (2) of rule 4 allow board of directors of a company to choose among various options, a better option to administer the CSR Policy. This rule 4(2) was slightly amended by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2015. We discussed those amendment rules earlier here.

Now, a gazetted notification published on 23^rd May 2016 in Official Gazette of India, which came into force from same date; amend sub – rule (2) of rule 4.

A new sub – rule have substituted the earlier one and amended sub – rule read as under:

“The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through

1. a company established under section 8 of the Act or a registered trust or a registered society, established by the company, either singly or along with any other company, or
2. a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government or any entity established under an Act of Parliament or a State legislature:

Provided that- if, the Board of a company decides to undertake its CSR activities through a company established under section 8 of the Act or a registered trust or a registered society, other than those specified in this sub-rule, such company or trust or society shall have an established track record of three years in undertaking similar programs or projects; and the company has specified the projects or programs to be undertaken, the modalities of utilisation of funds of such projects and programs and the monitoring and reporting mechanism”.

General Rule

CSR Administration Tool

Now as a general rule, the Board of a company may decide to undertake it CSR activities through either –

• a company established under Section 8 of the Companies Act, 2013;
• a registered Trust; or
• a registered society.

Any of these organisations may be established by –

• the company singly;
• the company along with any company;
• the Central Government;
• the State Government;
• any entity established under Act of Parliament (like SBI or ICSI); or
• any entity established under Act of State legislature.

Exception

There is an exception to this rule mentioned under sub – rule (2) of rule 2. The Board may decide in favour of any of these organisations (company or trust or society) not established as mentioned in the sub – rule. In that case, such company or trust or society shall have an established track record of three years in undertaking similar programs or projects. To avail this exception, the company in its CSR policy, shall,–

• Specify the projects or programs to be undertaken in its CSR policy;
• modalities of utilisation of CSR fund of such projects and programs; and
• the monitoring and reporting mechanism.

This amendment in CSR rules removes ambiguity in administration of CSR Polity. This amendment also pave the way for more government control on CSR expenditure when it may direct to entities established, directly or indirectly, by government or its administered entities.

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