Corporate Social Responsibility has come of age in India now with Companies Rule 2014. Here are the main points related to CSR.
Applicability
of CSR Provisions
1.
CSR
provisions have been notified on 27th February, 2014 and are enacted
u/s. 135 and Schedule VII of the Companies Act 2013 read with Companies
(Corporate Social Responsibility Policy) Rules, 2014 which shall be effective
from 1st April 2014
2.
CSR
provisions shall be complied and CSR committee shall be formed if during a
financial year any one of the following conditions are fulfilled by domestic
company including its holding and subsidiary company and foreign companies
having a branch office / project office in India
a.
net worth of Rs. 500 crores or more, OR
b.
turnover of Rs. 1000 crores or more, OR
c.
net profit of Rs. 5 crores or more
3.
Net
profit for the purpose of computing applicability shall mean net profit as per
the financial statements prepared in accordance with the applicable provisions
but will not include the following:
(a) any dividend received
from any company in India governed by sec 135; and
(b) any profit arising from
overseas branch or branches of the company whether operated as separate company
or otherwise.
Formation
of CSR Committee
4.
The
committee shall comprise of 3 or more directors, out of which at least one
should be an independent director.
Quantum
of CSR
5.
A
sum equivalent to 2% of the Average Net Profit made by the company in preceding three financial years shall
be the amount to be spent on CSR activities. “Average Net Profit” shall be calculated in accordance
with the provisions of section 198 of the Act.
Functions of CSR Committee
6. The functions to be
performed by the CSR committee are as follows:
a. Formulate and recommend
to the Board, a Corporate Social Responsibility Policy, which shall indicate
the activities to be undertaken by the company. The CSR activity/ies to be
undertaken by a corporate entity are specified in Schedule VII (described
below)
b. Recommend the amount of
expenditure to be incurred
c. Monitor the Corporate Social
Responsibility Policy of the company from time to time
Accountability
of the Board
7. Duties of the Board in
respect of CSR provisions are as follows
a. Approve the CSR Policy
for the company
b. Board’s report shall
include in the Annual Report the particulars in respect of CSR specified in
Annexure of the Rules
c. The same shall be
displayed on the company’s website, if any, as per the particulars specified in
Annexure.
d. Ensure that the
activities included in CSR Policy of the company are undertaken by the company.
Execution of CSR activity
8. Preference to be given to
local areas and areas surrounding the places where company operates.
9. A company may
conduct/implement its CSR programmes through Companies Trusts, Societies, or
Section 8 companies operating in India, which are set up by the company or its
holding or subsidiary or associate company. The Company has to specify projects
to be undertaken, mode of utilization and the monitoring and reporting system
10. If trust, society or
company under section 8 is not established by companies stated above then they
shall have an established track record of 3 years for undertaking similar
projects.
11. A company may collaborate
with other company such that the CSR committees of respective companies are in
a position to report separately on the CSR activities
Restrictions on CSR spending
12. Activities which fall
within the purview of Schedule VII (described below) of the Act only shall be
eligible and considered as expended for the purpose of CSR
13. Activities that benefit
only employees and their family will not constitute part of CSR.
14. Only such CSR activities
will be taken into consideration as are undertaken within India.
15. Activities of normal
course of business does not constitute to CSR activities.
16. Contribution of any
amount directly or indirectly to any political party under section 182 of the
Act, shall not be considered as CSR activities.
17. Expenses incurred for CSR
activities shall not exceed 5% of total CSR expenditure of a company is one
financial year.
Consequences
of non spending
18. If the Company fails to
spend the CSR amount in a financial year, the Board is required to specify the
reasons in its report for not spending the amount.
Activities
of CSR specified in Schedule VII
a. eradicating hunger,
poverty and malnutrition, promoting preventive health care and sanitation and
making available safe drinking water:
b. promoting education,
including special education and employment enhancing vocation skills especially
among children, women, elderly, and the differently abled and livelihood
enhancement projects;
c. 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;
d. 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;
e. 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.
f.
measures
for the benefit of armed forces veterans, war widows and their dependents;
g. training to promote rural
sports, nationally recognised sports, paralympic sports and Olympic sports;
h. contribution to the P me
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 Castes,
the Scheduled Tribes, other backward classes, minorities and women;
i.
contributions
or funds provided to technology incubators located within academic institutions
which are approved by the Central Government
j.
rural
development projects.
