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.
