Corporate Social Responsibility in the Wake of COVID-19
On April 2014, India was recognised as the first country around the globe to mandate corporate social responsibility under statutory law. The Companies Act, 2013 was amended to ascertain that certain profitable companies ought to disburse minimus of 2 per cent of the three-year annual net profit, every financial year, towards this cause. Further, under Schedule VII of the Act, any unitised fund allocated for CSR activities will now be transferred to fund as prescribed and such funds ought to be utilised within the preceding three years.
CSR activities have, therefore, been recognised as a vital addition to every company’s corporate strategy and commitment towards societal concerns. During the COVID-19 pandemic, India has faced challenging times leaving economists to navigate the cost of a nationwide lockdown. The report submitted by SBI Economic Research has ascertained that the seven-day long lockdown which was implemented in March 2020, has cost India an estimated loss of 1.4 lakh crore.
On this premise, the Government of India and the Ministry of Corporate Affairs (MCA) have devised several initiatives after recognising the hurdles faced by Limited Liability Partnerships and other Corporate Structures to tackle this global crisis and reduce their burden in adhering to the statutory requirements.
The primary guidelines issues on the same include;
The MCA through an office memorandum on 30 March 2020, widened the scope of mandatory CSR activities under the Companies Act. As such, any contribution extended to the PM Cares Fund will not equate to CSR expenses within the Act. This innovation was incorporated to cater to the rise of emergencies including pandemics or other distressing crisis. As such, the burden on corporate bodies to manage its funding during the COVI-19 outbreak has been mitigated through the innovation.
On March 23, 2020, the MCA through Circular No 10/2020, has qualified any spending of the CSR funds in wake of the pandemic, eligible to be considered as part of mandatory CSR activities. This approach further relaxed the stringent mandates necessitated by the Companies Act on corporate bodies to adhere to CSR requirements,
Through such broad interpretation on the statutory mandates, the MCA has further stated that CSR activities during the COVID-19 pandemic can include, among other things, any funds extended towards disaster management including rehabilitation and relief activities and eradication of poverty and hunger situations. In conclusion, the Government of India coupled with the MCA guiltiness have stepped up to widen the statutory interpretation attached with the CSR clauses under the Companies Act. This will, in turn, reduce the burden on corporate bodies to adhere to strict guidelines and mandates during this time of economic recession while promoting COVID-19 centric activities.
