Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders and the public.
Benefits
The benefits of CSR are many. Companies establish good reputations, attract positive attention, save money through operational efficiency, minimize environmental impacts, attract top talent and inspire innovation.
Applicability
1. Listed company
2. Public/Private Company
3. Section 8 Company
4. Holding & subsidiary
5. Foreign Company
Conditions Precedent:
1. Having net worth of 500 Crores or more; OR
2. Having turnover of 1000 Crores or more; OR
3. Having net profits of 5 Crores or more
in any financial year.
Further, the companies not qualifying for the CSR can also voluntarily contribute towards CSR activities.
Expenditure on CSR does not form part of business expenditure.
CSR Committee and Policy
The qualifying company shall require constituting of Committee under the BOARD, namely Corporate Social Responsibility (CSR) Committee consisting of 3 or more directors, of which atleast one should me Independent Director. Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more Directors. The CSR Committee shall formulate and recommend to the Board, a policy which shall indicate the activities to be undertaken (CSR Policy); recommend the amount of expenditure to be incurred on the activities referred and monitor the CSR Policy of the company.
The company requires spending of at least 2% of its average net profit (Profit before taxes) for the immediately preceding 3 financial years on CSR activities in India or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years], in pursuance of its Corporate Social Responsibility Policy.
What not to be construed as CSR activities
“Corporate Social Responsibility (CSR)” means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:-
1. activities undertaken in pursuance of normal course of business of the company
Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that-
(a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act;
(b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report;
2. any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level
- contribution of any amount directly or indirectly to any political party under section 182 of the Act;
1. activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019)
2. activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services
3. activities carried out for fulfillment of any other statutory obligations under any law in force in India
Implementation of CSR by
1. Company voluntarily contributing to CSR activities.
2. Section 8 company/ registered public trust/ registered society/ registered under section 12A and 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or along with any other company, or.
3. Section 8 company of the Act or a registered trust or a registered society, established by the Central Government or State Government, or
4. Any entity established under an Act of Parliament or a State legislature; or
5. A company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities.
Registration under CSR
The Company intending to undertake any CSR activities shall register themselves with Central Government in Form CSR-1 w.e.f. 1st April, 2021. Provided that nothing shall affect the CSR projects or programmes approved prior to the 01st day of April 2021.
CSR & Boards Report
Section 134 read with Rule 8 of the Companies Act, 2013, states that the details of the CSR activities undertaken by the company, if any, need to be disclosed in the Board’s Report.
The Annual Report on CSR shall contain the following
1. Details of CSR Committee
2. Details of CSR Policy
3. Projects approved by Board for CSR
4. The amount spent on the CSR activity. Where the allocated amount has not been spent towards the CSR activity, the reason for the same also needs to be disclosed.
Activities under CSR
The activities (in areas or subject) that can be done by the company to achieve its CSR obligations all stated in Schedule VII of the Companies Act, 2013
Display of CSR activities on its website
The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.
Unspent CSR amount
Until a fund is specified in Schedule VII for the purposes of subsection (5) and(6) of section 135 of the Act, the unspent CSR amount, if any, shall be transferred by the company to any fund included in schedule VII of the Act.”.
Disclaimer: The views expressed in this article are solely the opinion of the author.
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