India's Government Allows Multi-Year CSR Projects, Decriminalizes Non-Compliance

February 10, 2021

HR Policy India Update: Last week, the government amended various rules pertaining to corporate social responsibility (CSR), including allowing companies to undertake multi-year projects and making registration compulsory for agencies implementing CSR activities on behalf of companies. In addition, companies have been permitted to set off the excess amount spent under CSR up to three succeeding financial years, as is also allowed in order to create or acquire capital assets through CSR in the name of beneficiaries, a public authority, or registered trust, among others.  The idea is to move from just looking at expenditures to focusing on the impact of CSR projects. Beginning on April 1st, 2021, agencies implementing CSR projects for companies will need to register with the Ministry of Corporate Affairs portal. Another big change will be allowing international organizations to carry out designing, monitoring, and evaluating CSR projects. However, they cannot act as implementing agencies. 

CSR Offences by Firms Now a “Civil Wrong,” Not a Crime

In line with a commitment made by the Finance Minister, the government formally notified that non-compliance with CSR provisions would be a “Civil Wrong” and not a crime, and shifted such violations to a penalty regime. In July 2019, the government amended the law that treated non-compliance with CSR provisions as a criminal offence. The amended law, however, was not put into effect due to protests by stakeholders. This move, law firms observed, is a major shift towards a business-friendly approach, while ensuring compliance transparently. 

HRPI View: These are very welcome and progressive steps by the government.