Amendment to the Companies (Corporate Social Responsibility Policy) Rules, 2014 to include COVID-19 related activities

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According to Section 135 of the Companies Act, 2013 (Act), every company having 

(i) net worth of rupees five hundred crore or more, or

(ii) turnover of rupees one thousand crore or more, or 

(iii) a net profit of rupees five crore or more,

during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee (CSR Committee) of the Board.

Among other functions, the CSR Committee formulates and recommends the Corporate Social Responsibility (CSR) Policy which shall indicate the activities to be undertaken by the company in areas or subject specified in Schedule VII of the Act.

According to the Companies (Corporate Social Responsibility Policy) Rules, 2014 (CSR Policy Rules), Rules 2(e), CSR Policy relates to activities to be undertaken by the company in areas or subject  specified in Schedule VII of the Act and the expenditure thereon, excluding activities undertaken in pursuance of normal course of business of a company. 

Further, Rule 4 and Rule 6 of the CSR Policy Rules, excludes "activities undertaken in pursuance of normal course of business of a company" from the ambit of CSR Policy.

On 24 August 2020, the CSR Policy rules were amended to modify the aforesaid Rules 2, 4 and 6, to allow within the ambit of CSR Policy, companies engaged in research and development activity of new vaccine, drugs, medical devices in their normal course of business to undertake research and development of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23.

This is subject to the condition that, (i) such research and development activities must be carried out in collaboration with any institutes or organisations mentioned in Item (ix) of Schedule VII of the Act; and (ii) details of such activity must be disclosed in the annual report on CSR included in the board's report.

On 23 March 2020, the Ministry of Corporate Affairs announced that the corporate expenditure on fighting COVID-19 will constitute eligible expenditure towards CSR.  Read more at Corporate Expenditure on COVID-19 to count as eligible CSR Expenditure and COVID-19 related FAQ on CSR.

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