Corporate Social Responsibility (CSR) — A Commitment be a Better Tommorrow

MCA on Feb­ru­ary 27, 2014 noti­fied sec­tion 135 of the Com­pa­nies Act, 2013 and the sched­ule there­to, being Sched­ule VII to become effec­tive from 1^st April, 2014 to man­date Com­pa­nies cov­er under the sec­tion 135 of Com­pa­nies Act, 2013 are to man­date do the spend­ing under the Cor­po­rate Social Respon­si­bil­i­ty (CSR).

Who cov­er under the under the CSR norms:

Com­pa­nies sat­is­fied any of the fol­low­ing cri­te­ria shall con­sti­tute a CSR com­mit­tee and has to com­pile with the CSR norms:

1. Net worth of Rs. 500 crores or more; or
2. Turnover of Rs.1000 crores or more; or
3. Net Prof­it of Rs. 5 crores or more

Hence, the CSR rules will be applic­a­ble to any of the com­pa­nies which are sat­is­fied the any of the con­di­tion men­tioned in the above. The sec­tion says the same is applic­a­ble to “all” com­pa­nies means that Pub­lic, Pri­vate, Hold­ing, Sub­sidiary and for­eign com­pa­nies defines under the Com­pa­nies Act, 2013 will fall with­in the ambit of CSR.

The com­pa­nies fall under the CSR cri­te­ria has to frame CSR Policy:

The com­pa­nies fall under the above cri­te­ria to sat­is­fy the CSR norms has to frame a CSR com­mit­tee. CSR com­mit­tee for the list­ed com­pa­nies shall be at least 3 direc­tors of which at least 1 should be an inde­pen­dent direc­tor. And unlist­ed pri­vate com­pa­nies not hav­ing an inde­pen­dent direc­tor on the board can form CSR com­mit­tee even with­out an inde­pen­dent director.

Respon­si­bil­i­ty of the Board of Directors:

The Board of Direc­tors of the com­pa­nies who cov­er under the CSR norms shall:

• Review the rec­om­men­da­tions made by the CSR committee.
• Approve company’s CSR policy
• Dis­clo­sure of con­tents of the Pol­i­cy in company’s report/ website.
• Ensure that com­pa­ny spends at least 2% of its aver­age prof­its dur­ing pre­vi­ous 3 finan­cial years on CSR activ­i­ties spec­i­fied in Sched­ule VII. This spend­ing can be either cap­i­tal or rev­enue in nature. 

Sched­ule VII of the Com­pa­nies Act, 2013:

This sched­ule pro­vides an illus­tra­tive list of CSR activities:

1. Erad­i­cat­ing hunger, pover­ty and mal­nu­tri­tion, health care includ­ing pre­ven­tive health care and san­i­ta­tion and mak­ing avail­able safe drink­ing water;
2. Pro­mot­ing edu­ca­tion, includ­ing spe­cial edu­ca­tion and employ­ment enhanc­ing voca­tion espe­cial­ly among chil­dren, women, elder­ly, and the dif­fer­ent­ly abled and liveli­hood enhance­ment projects;

• Pro­mot­ing gen­der equal­i­ty, empow­er­ing women, set­ting up homes and hos­tels for women and orphans; set­ting up old age homes, day care cen­tre and such oth­er facil­i­ties for senior cit­i­zens and mea­sure for reduc­ing inequal­i­ties faced by social­ly and eco­nom­i­cal­ly back­ward groups;

1. Ensur­ing envi­ron­men­tal sus­tain­abil­i­ty, eco­log­i­cal bal­ance, pro­tec­tion of flo­ra and fau­na, ani­mal wel­fare, agro­forestry, con­ser­va­tion of nat­ur­al resources and main­tain­ing qual­i­ty of soil, air and water.
2. Pro­tec­tion of nation­al her­itage, art and cul­ture includ­ing restora­tion of build­ings and sites of his­tor­i­cal impor­tance and works of art; set­ting up pub­lic libraries; pro­mo­tion and devel­op­ment of tra­di­tion­al art and handicrafts;
3. Mea­sure for the ben­e­fit of armed forces vet­er­ans, war wid­ows and their dependents;

• Train­ing to pro­mote rur­al sports, nation­al­ly rec­og­nized sports, Par­a­lympic sports and Olympic sports;
• 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 funds for the wel­fare of the Sched­uled castes, the Sched­uled Tribes, oth­er back­ward class­es, minori­ties and women;

1. Con­tri­bu­tion or funds pro­vid­ed to tech­nol­o­gy incu­ba­tors locat­ed with­in aca­d­e­m­ic insti­tu­tions which are approved by the Cen­tral Government;
2. Rur­al devel­op­ment projects.