CSR: Section 135 of Companies Act, 2013 Read with CSR Rules, 2014 By Lokesh Vats


Applicability
 
Every Company (Including its Holding, Subsidiary and Foreign Company Having its branch office or project office in India) Having-
 
Net Worth of Rupees 500 cr or more, or
Turnover of Rupees 1000 cr or more, or
Net profit of Rupees 5 cr or more
{If not fall in above criteria for continuous 3 years then need not to comply with these.}

During the immediately preceding financial year.

Contribution of CSR

The Board shall ensure that the company spends, in every financial year, at 2%. of the average net profits of the company made during the three immediately preceding financial years, on its CSR Policy:
 
Company shall give preference to the local area and areas around it where it operates, for spending the amount.
 
If the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.

CSR Committee
 
CSR Committee of the Board consisting-

Three or more directors, out of which at least one director shall be an independent director.

{ where a company is not required to appoint an independent director, it shall have in its CSR Committee two or more directors}

{ The Board's report under sub-section (3) of section 134 shall disclose the composition of the CSR Committee.}

Private Company:- If having 2 directors in its board shall constitute with such director.

Foreign Company:- 2 Person in accordance with Sec. 380 or another person as nominated by the company.

CSR Policy

(1) The CSR Policy of the company shall include the following:-
 
(a) a list of CSR projects or programs which a company plans to undertake areas or subjects specified in of the Schedule VII of the Act, specifying modalities of execution of such project or programs and implementation schedules for the same; and

(b) The monitoring process of such projects or programs:

{CSR activities do not include the activities undertaken in pursuance of a normal course of business of a company.}

{The CSR Policy of the company shall specify that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a company.}

Activity of CSR Committee
 
The CSR Committee shall,—

(a) Formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in *Schedule VII.

(b) Recommend the amount of expenditure to be incurred on the activities.

(c) Monitor the CSR Policy of the company from time to time.

(1) The Board of every company shall—

(a) After taking into account the recommendations made by the CSR Committee, approve the CSR Policy for the company and disclose contents of such Policy in its report and also place it on the company's website.

(b) Ensure that the activities are included in the CSR Policy of the company are undertaken by the company.

CSR Activity Can be undertaken through-

  1. Company established under section 8 of the Act or

  2. Trust or

  3. Society, established by the company, either singly or along with any other company, or

  4. Any of above established by the Central Government or State Government or any entity established under an Act of Parliament or a State legislature:

{if, the Board of a company decides to undertake its CSR activities through a company established under section 8 of the Act or a registered trust or a registered society, other than those specified in this sub-rule, such company or trust or society shall have an established track record of three years in undertaking similar programs or projects; and the company has specified the projects or programs to be undertaken, the modalities of utilisation of funds of such projects and programs and the monitoring and reporting mechanism}.

{Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least three financial years but such expenditure including expenditure on administrative overheads, shall not exceed five percent of total CSR expenditure of the company in one financial year.}

  1. A company may also collaborate with other companies for undertaking projects or programs.

Not Considered as CSR Activity

  1. The CSR projects or programs or activities undertaken outside India shall not consider to CSR Expenditure.

  2. The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135.

  3. Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.

*SCHEDULE VII

Activities of CSR Policies-

(i) Eradicating hunger, poverty, and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of 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 centers 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, agroforestry, conservation of natural resources and maintaining the quality of soil, air and water 4[including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.

(v) 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;

(vi) measures for the benefit of armed forces veterans, war widows and their dependents;

(vii) Training to promote rural sports, nationally recognized sports, Paralympic sports, and Olympic sports.

(viii) contribution to the prime minister's national relief fund or any other fund set up by the central govt. for socio-economic development and relief and welfare of the scheduled caste, 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 govt.

(x) rural development projects]

(xi) slum area development.

Explanation.- For the purposes of this item, the term `slum area' shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.

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