What is the Purpose of Corporate Social Responsibility in India: A Brief Synopsis By CS Disha Barot


Applicability:

Every company having the net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more or a net profit of Rs. 5 crores or more during the immediately preceding financial year.

Every company including its holding or subsidiary, and a foreign company having its branch office or project office in India, which fulfils the criteria specified above shall comply with the provisions of section 135 of the Act and these rules:

CSR Committee:

It shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. However, an unlisted public Company and private Company do not require to appoint Independent Director. A private company having only two directors on its Board shall constitute its CSR Committee with two such directors.

Amount to be spent on CSR Activities:

The company shall spend, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:

CSR Activities:

(1) The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.

(2) The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through

(a) a company established under section 8 of the Act or a registered trust or a registered society, established by the company, either singly or along with any other company, or

(b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government or any entity established under an Act of Parliament or a State legislature :

If Section 8 Company or a registered trust or a registered society is not established by the Company, such section 8 company or trust or society shall have an established track record of three years in undertaking similar programs or projects.

(3) A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR Committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.

(4) The CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure.

(5) 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.

Author
CS Disha Barot
E-mail: csdishabarot@gmail.com

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