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CORPORATE SOCIAL RESPONSIBILITY

An overview of the Companies Act, 2013


Gayatri Subramaniam
Indian Institute of Corporate Affairs
EVOLUTION OF CSR
We are getting here

Section 135 Compliance

Investment in social development


Good corporate
as part of the Business plan
citizenship
(NVGs)

Strategic Community Strategic giving linked to business


investment interest

Philanthropy Passive donations to charities

Pure self interest


2 Corporate profit 16-07-2019
FROM CORPORATE RESPONSIBILITY
TO CORPORATE SOCIAL RESPONSIBILITY

Nation Building Compliance to


135

Immediate Community Sanitation, education,


development environment

Welfare of staff families School for staff children,


sanitation in staff colonies etc.

Staff welfare
Occupational safety
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GOVERNMENT & CSR

• PM’s Ten- • Voluntary • DPE • National • SEBI • PSE Guidelines


Point Social Guidelines Guidelin Voluntary mandate on • Section 135 of
Charter on CSR es Guidelines disclosure in Companies’
on Social, the form of Act, mandating
Environment Business CSR spend of
al and Responsibilit 2% profit
Economic y Reports
Responsibilit (BRRs) on
ies (NVGs) NVGs for top
100 listed
companies

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MILESTONES IN CSR
The New Companies Act 2013

18 Dec 08 Aug 30 Aug 27 Feb


2012 2013 2013 2014

• Companies Bill • Companies Bill • Gazette • Rules on


2013 2013 notification of Section 135
Approved by approved by the New notified on
the Lok Sabha the Rajya Companies MCA’s Website
Sabha Act 2013

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THE SIZE OF THE CSR SPACE –
APPROXIMATELY

► 16,000 Companies

► 18,000 Crores Indian Rupees

► 30,000 Directors of Boards

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QUALIFYING CRITERIA
 Section 135, sub-section 1 of the Companies Act,
2013 provides the qualifying criteria;
 Every company having
i. net worth of rupees five hundred crore or more,
ii. or turnover of rupees one thousand crore or
more,
iii. or a net profit of rupees five crore or more

during any financial year is mandated to constitute a


Corporate Social Responsibility Committee of the Board.

Any financial year refers to any of the three preceding


financial
7
years. 16-07-2019
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COMPOSITION OF CSR COMMITTEE

A Corporate Social Responsibility Committee of


the Board consists of three or more directors,
out of which at least one director shall be an
independent director.

An unlisted public company or a private


company covered under Section 135(1) of the
Act, which is not required to appoint an
independent director, shall have its CSR
Committee without such director .
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COMPOSITION OF CSR COMMITTEE
(CONT’D)
A private company with two directors on
Board should constitute its CSR Committee
with only two directors;

The CSR Committee shall institute a


transparent monitoring mechanism for
implementation of the CSR projects or
programs or activities undertaken by the
company.
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BOARD AND THE COMMITTEE

Three or more directors with at


Form a CSR Committee
least one independent

Formulate and recommend a


Approve the CSR Policy
CSR policy to the board

Recommend activities and the


Ensure Implementation of
amount of expenditure to be
CSR activities
incurred

Ensure 2% spend Monitor the CSR policy

Disclose reasons for not


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CSR PROJECT/PROGRAMME

Baseline survey

Duration of the Project

Amount allocated to the Project

Amount allocated to the Project in current FY

Start Date / End Date

Monitoring and Documentation

Objective Evaluation
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CSR PROJECT: IMPLEMENTATION

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SCHEDULE VII – CSR THEMATIC
AREAS

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RULES EFFCETIVE FROM 1st APRIL’2014

 Provisions apply to every Indian


company including its holding company
or subsidiary company;

 Surplus arising out of the CSR Projects


or programs or activities shall not form
part of the business profit of a company;

 CSR projects or programs or activities


undertaken in India only shall amount to
CSR Expenditure.
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PROVISIONS for FOREIGN COMPANIES
 Section 135 applies to foreign companies having
their branches or project offices in India;

 Net profit of such companies shall be determined


as per the profit and loss account prepared under
section 381(1)(a) read with section 198 of the
Companies Act, 2013;

 CSR Committees of such companies shall


comprise of at least two persons of which one
shall be as specified under clause (d) of sub-
section (1) of section 380 of the Act and another
person to be nominated by the foreign company.
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CSR POLICY

 The policy shall include a list of CSR projects


or programs which a company plans to
undertake falling within the purview of the
Schedule VII of the Act, specifying modalities
of execution of such projects or programs and
implementation schedules for the same;

 It will also elaborate the Monitoring process


for such projects or programs.

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CSR EXPENDITURE
 CSR expenditure shall include all expenditure
including contribution to corpuses of
trusts/societies/section 8 companies which are
created exclusively for undertaking CSR
activities or for purposes directly relatable to a
subject covered in Schedule VII;

 A company cannot make any contribution to


any political party or political purpose.

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CSR EXPENDITURE
 Activities undertaken in pursuance of the
normal course of business of the company
will not count as CSR;

 CSR Projects or programs or activities that


benefit only the employees of the company
and their families shall not be considered as
CSR activities.

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CSR EXPENDITURE ON CAPACITY
BUILDING

 For building CSR capacities of their own


personnel as well as of those of their
implementing agencies, companies may incur
expenditure up to 5 per cent of their CSR
budgets;

 Must be done through institutions with


established track records of at least 3 years.

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COLLABORATION AMONG COMPANIES
FOR IMPLEMENTING CSR

 A company may also collaborate with


other companies for undertaking projects
or programs or CSR activities;

 Provided CSR Committees of respective


companies are in a position to report
separately on such projects or programs in
accordance with these rules.

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THE SECTION 135: IMPLEMENTATION PROCESS
Operationalizing the
1 Developing a CSR Strategy 2
institutional mechanism –
Identifying team identification &
Identifying the
the
Implementing capacity building
3 Implementing Agencies
Agencies
3 (conducting
(conducting due
due diligence,
diligence,
if
if required)
required) Project Development –
Detailed Project Report 4
Clear identification of CSR (DPR)
Budget
5 Project approval –
Finalizing agreement with
insertion of the approved
the implementing agency
6
projects in the policy

Project Implementation 7
Documentation, Evaluation (Concurrent,
8 Monitoring (at Board and Final & preferably Third
Sub-board level) Party)

Project impact Preparation of reporting


9 assessment format and placement in 10
public domain
Let us show that we do care

22 THANK YOU 16-07-2019