Companies get more flexibility for carrying out CSR works

Getting more flexibility, corporates can now carry out CSR activities through non-profit entities and societies set up by governments that do not have three years' track record in undertaking such projects.
With the latest amendment to rules pertaining to Corporate Social Responsibility (CSR), entities would have a wider choice in carrying out such works as required under the new companies law.
In this regard, changes have been made to the CSR rules by the Corporate Affairs Ministry, which is implementing the Companies Act.
Under the Companies Act, 2013, certain class of entities are required to shell out at least two per cent of their three-year annual average net profit towards CSR activities. This came into effect from April 1, 2014.

Now, the Ministry has notified the changes in the Companies (Corporate Social Responsibility Policy) Rules, 2014.
CSR activity can be done through "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," as per the rules.

Section 8 companies are generally not-for-profit entities.
Earlier, only those implementing authorities having three years of established track record in undertaking similar programmes or projects were permitted to carry out CSR works on behalf of companies.

Now, this requirement has been done away with respect to section 8 firms, registered trusts and societies set up by governments.
Section 8 entities, registered trusts or registered societies that have been set up by the company concerned, either alone or with another company, are also exempted from the three-year track record requirement.
For entities, that are not set up by the governments or the company concerned, should compulsorily have an established three-year track record to carry out CSR works, as per the notification dated May 23.
"... Such company or trust or society shall have an established track record of three years in undertaking similar programmes or projects; and the company has specified the projects or programmes to be undertaken, the modalities of utilisation of funds of such projects and programmes and the monitoring and reporting mechanism," it noted.

In March, Corporate Affairs Minister Arun Jaitley informed the Rajya Sabha that as many as 460 listed firms had disclosed spending Rs 6,337.36 crore towards CSR activities in 2014-15.