MCA CSR Policy Amendment Rules 2020 and SEBI IFSC Guidelines Update

Note: This update reflects the regulatory position as of August 2020. The CSR Policy Rules have been amended further since; see the 2021 amendment and the 2022 amendment for the current framework.

MCA: Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020

A new proviso has been added to the definition in Rule 2(1)(e), permitting a company already engaged in research and development of new vaccines, drugs, and medical devices in the normal course of business to also carry out R&D related to COVID-19 for financial years 2020-21, 2021-22, and 2022-23 subject to two conditions:

• The R&D activity must be carried out in collaboration with one of the institutes or organisations listed under item (ix) of Schedule VII to the Companies Act. ^*
• Details of such activity must be disclosed separately in the annual report on CSR policy included in the board’s report.

Three further amendments support this change:

1. Rule 4(1): The words “excluding activities undertaken in pursuance of its normal course of business” have been deleted; companies may now undertake any activity under their stated CSR policy, whether new or ongoing.
2. Rule 6(1), first proviso: The proviso stating that CSR activities do not include those undertaken in the normal course of business has been deleted.
3. Rule 6(1), second proviso: With the first proviso removed, “Provided further that” in the second proviso has been replaced with “Provided that”.

^* Schedule VII item (ix) covers contributions to incubators funded by the central or state government (or an agency/PSU of either) and contributions to publicly funded universities, IITs, national laboratories, and autonomous bodies under ICAR, ICMR, CSIR, DAE, DRDO, DBT, DST, or the Ministry of Electronics and Information Technology engaged in science, technology, engineering, and medical research aimed at the SDGs.

For the broader CSR compliance picture, reporting formats, disclosure norms, and how these rules fit into the Companies Act framework, see building a robust, transparent CSR regime and Corporate Social Responsibility: an initiative for the betterment of society.

SEBI: (International Financial Services Centres) Guidelines, 2015 Amendments

Separately, and unrelated to the CSR changes above, SEBI has amended its IFSC Guidelines to streamline operations at India’s International Financial Services Centres:

1. Clause 19 amendment: Entities issuing or listing debt securities in an IFSC must prepare their Statement of Accounts under IFRS, US GAAP, Ind AS, or the accounting standard applicable in their place of incorporation. If an entity’s accounts aren’t prepared under IFRS/US GAAP/Ind AS, it must include a quantitative summary of the significant differences between its national accounting standards and IFRS in the disclosure documents filed with the exchange. Full notification: SEBI circular, August 2020.
2. New Clause 8(3): An entity, Indian or foreign, may provide financial services in an IFSC, subject to compliance with the applicable regulatory framework or guidelines SEBI specifies for that service from time to time. Full notification: SEBI circular, August 2020.

For related SEBI disclosure and listing changes from the same period, see the SEBI LODR amendment update.

How MBG Can Help

Whether it’s structuring CSR spend and disclosures under the current rules or preparing IFSC-compliant disclosure documentation, MBG’s corporate secretarial and corporate governance teams can help you stay ahead of both. Explore our Corporate Governance and Corporate Secretarial Services to see how.

Additional Resources:

Ministry of Home Affairs Notifies Notified Foreign Contribution Regulation