Writing a CSR agreement (MoU)

A CSR agreement, often called a memorandum of understanding (MoU), is the written contract between a company, or its foundation, and the implementing agency that will carry out a CSR project. It sets out what the money is for, how and when it is released, what the agency reports, and what happens to assets, interest and unspent money. The Companies (CSR Policy) Rules, 2014 (the CSR Rules) don’t prescribe a format, but several of them can only be met with one.

This guide explains why, lists the clauses to include, shows a tranche plan that works and covers the common mistakes. It is for CSR teams, company secretaries and the NGOs on the other side of the table. It is general information, not legal advice: have a lawyer review your final agreement.

Why the rules make a written agreement essential

The clauses to include

Tranches that keep money moving

Release money in instalments linked to milestones that show progress, not just the passing of time:

• Make the first tranche big enough to start well, covering hiring, materials and a small buffer. A starved project stalls.
• Link later tranches to a short report and a utilisation certificate, not to a long wait for approvals. A late tranche harms the people the project serves.
• Time tranches for use within the financial year. The FAQs say “mere disbursal of funds for implementation of a project does not amount to spending unless the implementing agency utilises the whole amount”, and ask companies to disburse so that agencies can use the money “during the financial year” (FAQ 7.4, General Circular 14/2021). A large transfer in late March helps nobody.

Our guide to CSR budgets and tranches covers tranche design for multi-year projects.

Utilisation, reporting and audit rights

The CFO’s certificate under Rule 4(5) rests on what the agency sends. Ask for:

• a utilisation certificate for each tranche, showing spending against each budget line;
• a statement as at 31 March, within a fixed number of days, so the company can decide in time what goes into its Unspent CSR Account;
• progress reports at agreed intervals, on outcomes and problems as well as spending;
• a final report and a final utilisation certificate.

Give the company, or an auditor it appoints, the right to inspect the books and visit the work with reasonable notice. Ask the agency to track the grant separately in its accounts; a separate bank account makes that easier. Our guide to reporting to funders covers what a good utilisation certificate contains.

Assets, surplus and unspent money

Capital assets. If the project builds or buys something lasting, such as a classroom or a water plant, Rule 7(4) allows it to be held only by a Section 8 company, registered public trust or registered society with charitable objects and a CSR registration number; by the project’s beneficiaries organised as self-help groups, collectives or other entities; or by a public authority. The company can’t keep it. Name the holder in the agreement, with its written consent, and say who pays for upkeep. Stamp duty and registration fees on transferring an asset count as CSR spending in the year of transfer (FAQ 3.6). See capital assets in CSR.

Surplus. Interest an agency earns on CSR funds, income a project earns and money from selling project materials are surplus (FAQ 3.4). Under Rule 7(2) it can’t become business profit: it must go back into the same project, into the company’s Unspent CSR Account, or to a Schedule VII fund within six months of the year-end. Require the agency to show surplus in every utilisation statement, and usually to plough it back into the project.

Unspent money. The FAQs don’t spell out how money still held by an agency at 31 March should be treated, so agree the approach with your auditors before you sign and write it in. At least require a statement of the unused balance soon after the year-end, and say whether it is refunded or kept for the same project. Keep the company’s own deadlines in view: money for ongoing projects goes to its Unspent CSR Account within 30 days of the year-end, and other unspent money to a Schedule VII fund within six months. On completion or early termination, unspent money should come back to the company. See unspent CSR money.

Safeguarding, data, intellectual property and branding

• Safeguarding. Make the agency’s safeguarding policy apply to everyone working on the project, with training before any work with children starts, and require serious incidents to be reported to the company within a set time, such as 24 hours. Under the POCSO Act, 2012, anyone who knows or suspects that a child has been sexually abused must report it to the police or the Special Juvenile Police Unit, so never ask for concerns to be settled privately. See child protection and safeguarding.
• Personal data. Say what personal data about participants is collected, why, who sees it, how it is protected and when it is deleted. Share only what the company needs, often counts rather than names. The main duties under the Digital Personal Data Protection Act, 2023 apply from 13 May 2027, including verifiable consent from a parent or guardian before a child’s data is processed. See data protection for NGOs.
• Intellectual property. Say who owns training materials, reports, photographs and data, and what each side may use them for. For example, the agency may keep ownership and give the company a licence to use them in its reports.
• Branding and stories. The FAQs say companies “shall not use CSR purely as a marketing or brand building tool”, though “brand building as a collateral benefit does not vitiate the spirit of CSR” (FAQ 4.3). Keep acknowledgement modest, keep product promotion out of the project, and require consent for every identifiable photograph and story. See consent, photos and dignity.

Changes, termination and disputes

Projects change, so say how. Allow small moves between budget lines within an agreed limit, and anything larger only with the company’s written approval. On the company’s side, the matching change goes through its own process: the board can alter the annual action plan during the year on the CSR committee’s recommendation, with reasonable justification (Rule 5(2)), and an ongoing project can’t be extended beyond three years after the year it started (FAQ 6.3).

Set out when either side can end the agreement, such as a serious breach, a safeguarding failure, fraud, or the loss of the agency’s CSR registration or income-tax registrations. Give notice periods, and say what happens to work in progress, unspent money and assets. Add a route for disputes: a meeting of the two heads first, then mediation or arbitration, as your lawyer advises.

Common mistakes

• Signing with an agency that has no CSR registration number, or with no clause on what happens if its registrations lapse mid-project.
• Releasing most of the money in the last weeks of the financial year.
• No statement as at 31 March, so the company can’t work out its unspent amount in time.
• Silence on interest, so surplus goes unreported.
• No named holder for assets, leaving a building with nobody eligible to own it.
• Branding clauses that turn a programme into an advertisement.
• A template copied from another funder that doesn’t match your annual action plan.
• Asking for something the agency can’t lawfully do, such as passing foreign contribution to a local partner, which section 7 of the Foreign Contribution (Regulation) Act, 2010 bars.