In order to boost funding of vaccines, drugs and medical devices in light of the pandemic, the Ministry of Corporate Affairs (“MCA”), by way of Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 (“Amendment”) has amended the Companies (Corporate Social Responsibility Policy) Rules, 2014 (“Principal Rules”).Through the Amendment, companies engaged in research and development activities of new vaccine, drugs and medical devices in their normal course of business can undertake research and development of new vaccines and drugs for COVID-19 for financial years 2020-21, 2021-22 and 2022-23 which will fall under the purview of CSR Policy of the Principal Rules.
However, in order to ensure that the abovementioned activities fall under the CSR Policy, companies have to carry out the activities in collaboration with any of the following institutes:
i. Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government or State Government or Public Sector Undertaking or any agency of the Central Government or State Government; and
ii. Contributions to public funded Universities; Indian Institute of Technology (IITs); National Laboratories and autonomous bodies established under Department of Atomic Energy (DAE); Department of Biotechnology (DBT); Department of Science and Technology (DST); Department of Pharmaceuticals; Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of Electronics and Information Technology and other bodies, namely Defense Research and Development Organisation (DRDO); Indian Council of Agricultural Research (ICAR); Indian Council of Medical Research (ICMR) and Council of Scientific and Industrial Research (CSIR), engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).
It is interesting to mention that the institutes have been newly inserted through an amendment to item no. (ix) to Schedule VII of the Companies Act, 2013.
The Amendments have gained effect immediately.
For a detailed read of the amendment to the Companies (Corporate Social Responsibility Policy) Rules, 2014, please refer to the table provided below.
| Principal Regulations | Amendment | Implications |
| Rue 2- Definitions
(1) (…)
(e) “CSR Policy” relates to the activities to be undertaken by the company as specified in Schedule VII to the Act and the expenditure thereon, excluding activities undertaken in pursuance of normal course of business of a company)
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Rule 2- Definitions
(1) (…)
(e) “CSR Policy” relates to the activities to be undertaken by the company as specified in Schedule VII to the Act and the expenditure thereon, excluding activities undertaken in pursuance of normal course of business of a company)
Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22 and 2022-23 subject to the conditions that-
(i) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act.
(ii) details of such activity shall be disclosed separately in the Annual Report on CSR included in the Board’s Report” |
Under the Principal Rules, activities undertaken in pursuance of normal course of business are excluded from the purview of “CSR Policy”.
However, in light of the pandemic COVID-19, the present amendment has been issued wherein a new proviso is being inserted by virtue of which companies which are engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business can undertake research and development of new vaccines, drugs and medical devices related to COVID-19 pandemic for the financial years 2020-21, 2021-22 and 2022-23 subject to the following conditions:
i. The company has to carry out such research and development activities in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act.
[Item (ix) of Schedule VII of the Act has been entirely substituted by the MCA by a Gazette Notification dated 24th August, 2020 and has been detailed above]
(ii) The company has to disclose the details of such activity separately in the Annual Report on CSR included in the Board’s Report.
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| Rule 4: CSR Activities.-
(1) The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business. |
Rule 4: CSR Activities.-
(1) The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business. |
With the omission of the phrase “excluding activities undertaken in pursuance of its normal course of business”, companies now take up CSR activities as per the CSR Policy which may include activities undertaken in their normal course of business subject to fulfilling the specified conditions explained above.
As the definition of “CSR Policy” is also being amended so that companies which are generally into developing vaccines/ medical devices can include in their CSR Policy activities related to development of drugs/ vaccines/ medical devices for COVID-19 pandemic .
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| Rule 6: CSR Policy-
1. The CSR Policy of the company shall, inter-alia, include the following, namely –
(a) a list of CSR projects or programs which a company plans to undertake falling within the purview of the Schedule VII of the Act, specifying modalities of execution of such project or programs and implementation schedules for the same; and
(b) monitoring process of such projects or programs.
Provided that the CSR activities does not include the activities undertaken in pursuance of normal course of business of a company.
Provided further that the Board of Directors shall ensure that activities included by a company in its Corporate€ Social Responsibility Policy are related to the activities included in Schedule VII of the Act.
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Rule 6: CSR Policy-
1. The CSR Policy of the company shall, inter-alia, include the following, namely –
(a) a list of CSR projects or programs which a company plans to undertake falling within the purview of the Schedule VII of the Act, specifying modalities of execution of such project or programs and implementation schedules for the same; and
(b) monitoring process of such projects or programs.
Provided that the CSR activities does not include the activities undertaken in pursuance of normal course of business of a company.
Provided further that the Board of Directors shall ensure that activities included by a company in its Corporate Social Responsibility Policy are related to the activities included in Schedule VII of the Act.
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With the present amendment, activities which are undertaken in the normal course of business of the company can also be a part of the CSR Policy of the company subject to fulfilling the specified conditions explained above. |
Source: Ministry of Corporate Affairs
