The Ministry of Corporate Affairs (‘MCA’), by its Circular dated August 25, 2021, has issued clarifications on several matters related to corporate social responsibility (‘CSR’), a few key ones being:

i.     Contribution to corpus of an entity will not be considered an admissible CSR expenditure with effect from January 22, 2021;

ii.    While an activity designed exclusively for the benefit of employees will not qualify for a permissible CSR expenditure, an activity which is designed for the benefit of public at large, and if the employees and their family members are incidental beneficiaries, then such activity would qualify as an eligible CSR activity;

iii.   A company is permitted to undertake CSR activities in ongoing projects. With respect to an ‘ongoing project’ as defined in the Companies (CSR Policy) Rules, 2014, it has been clarified that the maximum permissible time period for an ‘ongoing project’ will be three financial years excluding the financial year in which the project commenced, and this permissible time period will not be extended under any circumstances. An ‘ongoing project’ is considered to have ‘commenced’ when the company has either issued the work order pertaining to the project or awarded the contract for execution of the project;

iv.   Mere disbursal of funds to the implementing agency for implementation of a CSR project does not amount to spending unless the implementing agency utilizes the whole amount; and

v.    With respect to impact assessment, if two or more companies collaborate for implementation of a CSR project, the impact assessment carried out on the common project by one company can be shared with the other collaborating companies for the purpose of disclosure to the board and in the annual report. The collaborating companies may mutually decide the sharing of cost of such impact assessment subject to the statutorily prescribed limits (i.e., five % of total CSR expenditure for the financial year or ₹ 5 million (approx. US$ 67,000), whichever is less).