CORPORATE SOCIAL RESPONSIBILITY AS PER COMPANIES ACT, 2013

CORPORATE SOCIAL RESPONSIBILITY AS PER COMPANIES ACT, 2013

Introduction

Section 135  and Schedule VII of the Companies Act, 2013 deals with CSR. It makes all profit making  companies to meet mandatory social obligations requiring them to spend a portion of their annual profits for achieving social objectives in select sectors.

Applicability

CSR provisions are applicable to:

·         A company having a net worth of Rs.500 Crores  Or

·         A turnover of Rs.1,000 Crores or

·         A net profit of Rs.5 Crores ( from Indian operations)

They are supposed to spend in every financial year, a specified portion of its net profits on CSR activities. i.e. atleast 2% of the average net profits of the company during the three immediately preceding financial years.

This provision is applicable to foreign companies having branch office or project office in India also.

Every company has to form a CSR Committee to formulate a CSR policy, to recommend the quantum of funds to be spent and to monitor the implementation of policy and utilistion of the CSR funds. In the case of a listed company CSR committee should have 3 or more directors of which one person should be an independent director. In the case of other companies, CSR committee should contain at least 2 directors.

CSR activities can be carried out by:

·         Company itself or

·         Another trust/society/Sec 8 company established for this purpose and having 3 years track record in similar activities

·         Through the collaboration with another company in its CSR activities

Other points to be noted are:

·         Permitted CSR Activities are specified in Schedule VII of the Companies Act

·         CSR activities and expenditure should be carried out only in India

·         It cannot benefit company’s own employees or their families only.

·         You can't contribute to any political party directly or indirectly

·         Capacity building expenditure, capital expenditure and operating expenditure for running CSR activities should not exceed 5% of the total CSR funds

·         Company should give a report of CSR activities in the Annual Report to Shareholders

As per Schedule VII of the Act, the following activities are qualified as CSR Activities:

        i.            eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water;

      ii.            promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects;

    iii.            promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;

    iv.            ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro-forestry, conservation of natural resources and maintaining quality of soil, air and water;

      v.            protection of national heritage, alt and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts:

    vi.            measures for the benefit of armed forces veterans, war widows and their dependents;

  vii.            training to promote rural sports, nationally recognised sports, Paralympics sports and Olympic sports;

viii.            contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Caste, the Scheduled Tribes, other backward classes, minorities and women;

    ix.            contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government

      x.            rural development projects

Conclusion

It is a step in the right direction initiated by the Central Government. It is an opportunity to the corporate world to repay to the society against the gains they drawn from it. However, the Act does not mandates the spending of the CSR funds compulsorily, it will go a long way so far the change in attitude of the corporate are concerned. Even if a part of the CSR funds is unlocked and flown into the system, the impact will be huge so far as the poor and downtrodden of the country are concerned.