Companies using CSR funds on COVID awareness campaigns lawful

According to the Ministry of Corporate Affairs, such expenditure will be considered as promotion of healthcare, sanitation and disaster management

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Ministry of Corporate Affairs (MCA) has clarified that companies can, if they so wish, use their corporate social responsibility (CSR) funds to spread awareness amongst their employees and their families. This will only be considered as a lawful spending on activity promoting healthcare, education and sanitation, and a step towards preventive healthcare and disaster management that will benefit the public at large, as per the Companies Act.

Such activities will have to be conducted as per the Companies (CSR policy) Rules of 2014, according to which activities that solely benefit the employees of a company and their family members alone, cannot qualify as CSR activities. That is, a company cannot just vaccinate its own employees and their family members and avoid doing the same for the people who are part of its supply chain or belong to the local community.

Employee cost is accounted for in an organisation’s net profit, and only a small percentage of this goes towards CSR funds. Last year, the Ministry had allowed only life sciences companies — those involved in research and development or in developing medicines or vaccines — to use their CSR funds to find therapies or cures amidst the coronavirus outbreak.

In March 2020, the Ministry clarified that donations to the Prime Minister’s emergency or pandemic relief fund are eligible to be spent on CSR activities.

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