The Ministry of Corporate Affairs (MCA) notified 22 January, 2021 to enforce Section 21 of Companies (Amendment) Act, 2019 related to Corporate Social Responsibility (CSR).
“In exercise of the powers conferred by sub-section (3) of section 1 of the Companies (Amendment) Act, 2019 (22 of 2019), the Central Government hereby appoints the 22nd day of January, 2021 as the date on which the provisions of section 21 of the said Act shall come into force,” the MCA said.
Section 21 of the Companies (Amendment) Act, 2019 sought to amend the Section 135 of the Companies Act, 2013 which relates to CSR.
The 2019 Amendment Act introduced penal provisions for non compliance with the provisions of Section 135 of the Act relating to the reporting utilization and transfer of the unspent CSR funding amount Companies found to be non-compliant would be punishable with fine which shall not be less than Rs. 50,000 but which may extend to Rs. 25,00,000 and every such officer of the company found to be in default shall be punishable with imprisonment for a term which may extend to 3 years or with fine which shall not be less than Rs. 50,000 but which may extend to Rs. 5,00,000, or with both.
Earlier, companies could cite their reasons for not complying with the said provisions of Section 135 in their board meetings and other than an adverse reputational Impact, there were no penal consequences.
However, with the 2019 Amendment Act, the legislature now ensures stricter compliance as well as accountability for such non compliance resulting in payment of fine by the company and potential risk of imprisonment of the officers found to be in default.
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