General CSR Queries Related to COVID-19 by MCA Department

Just like any other public agency, MCA is also trying hard to maintain everything and taking all the required steps in the wake of the rapidly spreading CoronaVirus. In the same effort, on April 10th, 2020 Friday, the Ministry of Corporate Affairs (MCA) come up with circular addressing Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR) related to the situation caused by COVID-19.

The issued circular is actually a clarification on the spending of CSR funds for COVID-19 stating that “the amount spent on COVID-19 by companies will count towards CSR spending”. In this regard, the ministry received several requests for representation from various stakeholders looking for an explanation on the eligibility of CSR expenditure related to COVID-19.

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The issued Frequently Asked Questions (FAQs) by the Ministry of Corporate Affairs (MCA) stated that the contribution made to ‘PM CARES Fund’ will be eligible to consider in CSR expenditure as per the item no (viii) of Schedule VII of the Companies Act, 2013 and it has been additionally defined vide Office memorandum F. No. CSR-05/1/2020-CSR-MCA dated 28th March 2020. Meanwhile, ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is excluded from Schedule VII of the Companies Act, 2013 and thus any contribution to such funds will be not considered as appropriate CSR expenditure.

It is notable that, The contribution made to State Disaster Management Authority to battle Coronavirus Outbreak will be eligible to be considered as CSR expenditure under item no (xii) of Schedule VII of 2013 and it is also denoted in vide general circular No. 10/2020 dated 23rd March 2020.

Ministry vides general circular No. 10/2020 dated 23rd March 2020 also stats that spending CSR funds for COVID-19 related activities will qualify as CSR expenditure. It is further explained that funds may be spent on various activities related to COVID-19 under items nos. (i) and (xii) of Schedule VII linking to the promotion of health care including preventive health care and sanitation, and disaster management. Further, according to general circular No. 21/2014 dated 18.06.2014, items in Schedule VII are broad-based and may be interpreted liberally for this purpose.

The circular also states that “ Payment of wages to temporary or casual or daily wage workers during the lockdown period is part of the moral/ humanitarian/ contractual commitments of the company, organization or businesses and it is applicable to all companies whether they have any legal obligation for CSR contribution under section 135 of the companies act 2013 Check out the AGM due date for the newly registered company under the companies act 2013. Also, we have mentioned two conditions for easy understanding. Read More . Thus, payment of wages to temporary or casual or daily wage workers during this period of the lockdown will be not considered under CSR expenditure.

In the case of any ex-gratia payment, made to temporary/casual workers/ daily wage workers above the disbursement of wages, specifically for keep them stand strong against COVID 19, then the same will be acceptable in CSR expenditure as a one- time exception provided there is an explicit declaration to that effect by the Board of the company, which need to be properly certified by the statutory auditor. Download and view general circular No. 15 /2020 on CSR FAQs Related to Covid-19