CSR and its Mandatory regime in India

This is no new that many large business entities use a huge amount of resources from the society to carry out their business and in return as a matter of courteous behavior there naturally comes a sense responsibility on their part to offer a helping hand for the upliftment of society. Adopting this social attitude many entities have voluntarily come forward and taken up Corporate Social Responsibility initiatives, while others continuing to exploit the resources without giving anything in return. Thereby, recognizing the need for social responsibility and considering the current situation of resources in the country’s Corporate Social Responsibility initiatives are no longer seen as a courteous or volunteer part but have become an alarming emergency. To put into life the sleeping social attitude towards society, Companies Act, 2013 has taken initiatives through section 135 to make CSR activities mandatory for certain specified companies, this will not only help to inculcate social attitude among businesses but also bring in the practicality of social behavior of country.
Various provisions relating to CSR activities are being discussed herewith.

Provisions of Companies Act, 2013 (S.135)

Applicability for constituting CSR Committee

As per the provisions OF Section 135 companies fulfilling any of these 3 conditions are required to constitute Corporate Social Responsibility committee

  • Net worth – Rs.500 crore or more,
  • turnover – Rs. 1000 crore or more
  • net profit rupees 5 crores or more
    (In immediately preceding FY)

Corporate Social responsibility committee
No. of Directors – 3 or more (1 to be Independent director),
If Independent director is not applicable then 2 or more directors

CSR, CSR and its Mandatory regime in India

What to do under CSR?

 Role of Committee

  1. Formulate the policy (including the activities specified in Schedule-VII)
  2. Recommend expenditure
  3. Monitor the Policy

Role of Board

  1. Take the recommendations of the Committee and approve it;
  2. Ensure that activities included in Policy are been undertaken by the company.
  3. Ensure that company is spending at least 2% of the average net profits (3 immediately preceding FY) for CSR activities.

How to do?

Board may carry out the activity through

If such society has similar records of 3 years in undertaking similar projects Company has Specified projects, the modalities of utilization of funds of such projects Preference to the local area should be given while undertaking CSR activities.

What activities to do?

Activities which can be included by companies in their Corporate Social Responsibility Policies are

  1. Eradicating hunger, providing sanitation, and making available safe drinking water.
  2. Promoting education, among children, women, elderly, and the differently-abled and livelihood enhancement projects.
  3. Promoting gender equality, setting up homes and hostels for women and orphans; setting up old age homes, daycare centers, and such other facilities for senior citizens reducing inequalities.
  4. ensuring environmental sustainability
  5. protection of national heritage; promotion and development of traditional art and handicrafts;
  6. measures for the benefit of armed forces veterans, war widows, and their dependents;
  7. training to promote rural sports, nationally recognized sports, paralympic sports, and Olympic sports
  8. contribution to the prime minister’s national relief fund or any other fund set up by the central govt. for socio-economic development of the scheduled caste, minorities and women and others;
  9. contributions or funds provided to technology incubators rural development projects
  10. slum area development.

CSR Stats and success stories of other companies

Many organizations have been an inspiration for many others when it comes to CSR expenditure by building a strong CSR foundation. Few of the names are been highlighted here:

CSR, CSR and its Mandatory regime in India

Novartis Healthcare Private Limited
By proving comprehensive care (prevention and treatment of leprosy-related disabilities) for leprosy patients, it has played a good role in bettering society. Other CSR areas are

  1. Eradication Hunger
  2. Preventive Healthcare
  3. Education,

Tupperware India private limited (Plastic products)
Tupper has been one of those companies which have been voluntarily taking up CSR activities much before it came up; it has benefited the society by providing

  1. Preventive Healthcare
  2. Education
  3. Gender Equality
  4. Rural Development
  5. Contribution to Central Government Fund

Disclosure requirements
In the Board’s Report –
• Composition of the corporate social responsibility committee
• Specify reasons for not spending the amount earmarked for Corporate Social Responsibility activities
In the Company’s website – CSR policy

FAQ

A company which ceases to fulfill the criteria for 3 consecutive FYs shall not be required to constitute CSR committee and comply with Section 135 till it meets such criteria

Expenses incurred by companies for the fulfillment of any Act/ Statute would not count as CSR expenditure under the Companies Act.

No

The items enlisted in the Schedule VII are broad-based and are intended to cover wide range of activities. Therefore entries in Schedule VII must be interpreted liberally.

No, CSR activities should be undertaken by the companies in project/ programme mode

Salaries paid by the companies to regular CSR staff as well as to volunteers of the companies can be factored into CSR cost as part of the CSR expenditure.

Yes

No

No, company should “spend” the amount.