The Ministry of Corporate Affairs (MCA) on 30 March 2020 appealed to Managing Directors/CEOs of Top 1000 companies (in terms of market capitalization) to contribute generously to the 'Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund' ('PM CARES Fund').
In the appeal, it was mentioned that such contributions may, inter alia, include the unspent amount on Corporate Social Responsibility (CSR) activities, if any. As such, any amount spent over and above the minimum prescribed CSR amount for FY 2019-20, can be offset later against CSR obligations arising in subsequent financial years.
In pursuance to the said appeal, certain companies claimed to have contributed CSR funds to the 'PM CARES Fund' over and above their prescribed CSR amount for FY 2019-20.
After examining such claims, the Ministry issued a Circular on 20 May 2021 to clarify certain ambiguities. It states that in cases where a company has contributed any amount to the 'PM CARES Fund' on 31 March 2020 for FY 2019-20, which is over and above the minimum amount as prescribed under Section 135(5) of the Companies Act, 2013;
And, if such excess amount (or part thereof) is offset against the requirement to spend the CSR amount for FY 2020-21 (in line with the aforementioned appeal), then the same would not be viewed as a violation, subject to the conditions that:
- The amount offset (as such) should have factored the unspent CSR amount for previous financial years, if any
- The Chief Financial Officer must certify that the contribution to the 'PM CARES Fund' were indeed completed on 31 March 2020 in pursuance of the appeal, and the same must also be so certified by the statutory auditor of the company
- The details of such contribution shall be disclosed separately in the Annual Report on CSR as well as in the Board's Report for FY 2020-21, as per Section 134(3)(o) of the Companies Act, 2013.
The MCA Circular can be accessed here.
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Our Comments This Circular is in line with the MCA's earlier appeal on 30 March 2020 which suggested that any excess contributions made to the 'PM Cares Fund' may be carried forward and would be eligible for offset against future years' CSR contribution obligations. This clarification enhances the confidence of Corporate India to continue to support the government during this unprecedented time and builds trust within public-private ecosystem. |
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