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India: CSR fund spent for COVID-19 is CSR Activity

March 30, 2020

Several steps are being taken by the Indian Government to tackle the spread of novel coronavirus in the country which has been termed by many as the greatest challenge faced by the world since the Second World War.

In a slew of other measures being issued by the Government of India, the Ministry of Corporate Affairs (MCA) has also released a number of circulars and notices in this regard considering the problems being faced by Corporations and Limited Liability Partnerships (LLP) in the wake of this crisis.

Contribution made towards PM CARES Fund is CSR activity

On March 30, 2020, the MCA has clarified through an office memorandum that any contribution made to the Prime Minister’s Citizen’s Assistance and Relief in Emergency Situations Fund (PM CARES Fund) shall qualify as Corporate Social Responsibility expenditure under the Companies Act, 2013. The PM CARES Fund has been setup with the chief objective of tackling any emergency or distress situation such as the one posed by the COVID-19 outbreak.

Spending of CSR funds for COVID-19 is CSR Activity

The Ministry of Corporate Affairs in lieu of the Coronavirus Outbreak in India and keeping in view the declaration by the World Health Organization (WHO) and the declaration by the Indian Government to treat it as a notified disaster has clarified vide circular no. 10/2020 dated March 23, 2020, that spending of the Corporate Social Responsibility (herein after mentioned as CSR) funds for COVID-19 is eligible CSR activity.

In April 2014, India became the first country in the world to make CSR mandatory through an amendment to the Companies Act, 2013. As a part of the CSR compliance, companies can invest a share of their profits in areas encompassing poverty, gender equality, hunger and education.

For what activities CSR Funds can be spent?

The Circular states that the CSR funds can be spent by Companies for various activities related to COVID-19 as enlisted under item nos. (i)- eradicating extreme hunger and poverty and (xii)- disaster management, including relief, rehabilitation and reconstruction activities of Schedule VII appended to the Companies Act, 2013 and relating to promotion of health care, including preventive healthcare and sanitation and disaster management. MCA has also notified that items under Schedule VII are broad based and shall be interpreted liberally in the wake of the crisis.

The items under Schedule VII can be accessed here.

MCA clarifies that contributions made to State Relief or CM Relief Fund is not CSR activity

A subsequent development in the aforesaid context, is that the MCA vide its General Circular No. 15/2020 dated April 10, 2020 has issued a set of clarifications in the wake of references/ representations from various stakeholders seeking clarifications on eligibility of CSR expenditure related to COVID-19 activities. In this Circular, the MCA has inter alia clarified that contributions made to the State’s Relief Funds or CM Relief Funds will not qualify as CSR activity.

Read more legal updates about Coronavirus via clicking on our links below:

India: The Functioning of the Indian Judiciary amidst Novel Coronavirus (COVID-19) Outbreak

India: Hearings at the Trademark Registry adjourned till April 15, 2020

FSSAI: Imported food, poultry safe from Corona Virus in India

Coronavirus and Force Majeure Clause in Contracts

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