The concept of Corporate Social Responsibility (CSR) is not new in India, companies have been voluntarily contributing towards CSR. However, with the enactment of Companies Act, 2013 it has become mandatory for some companies to contribute towards CSR from the date on which provisions relating to CSR which are governed by section 135 of Companies Act, 2013 has been notified i.e. 01.04.2014.
The provisions of CSR will be applicable for every company whether private/public company(listed/unlisted) or foreign companies having branches or project offices in India which meet any of the three specified criteria mentioned below during any of the three preceding financial years:
Every company to which the provisions are applicable must formulate a CSR Committee of the Board.
It shall be the duty of the Committee to —
The CSR Policy will be formulated and recommended by the CSR Committee to the Board which shall indicate the activities to be undertaken by the company in areas or subject, as specified in Schedule VII of the Companies Act, 2013.The Board would consider the same in its meeting and approve the same with or without modifications, as the case may be and the final policy should be displayed on the website of the company, if any.Further, it will be the duty of Board to ensure that the activities as included in Corporate Social Responsibility Policy of the company are undertaken by the company.
Activities which have been specified in Schedule VII of Companies Act, 2013 which may be included by companies in their Corporate Social Responsibility Policies are as follows:
Activities relating to:—
(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 centres 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, agro forestry, conservation of natural resources and maintaining quality of soil, air and water [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 Government for socio economic development and relief and welfare of the schedule 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 Government.
(x) Rural development projects.
(xi) Slum area development.
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.
The activities mentioned above should be interpreted liberally so as to capture the essence of the subjects enumerated.
Every company to which the provisions relating to CSR is applicable must disclose the following in its Board’s Report which is prepared in accordance with section 134(3) of Companies Act, 2013:
Following may be noted with regard to CSR Expenditure and the CSR Activities:
Though it is mandatory to contribute a specified amount towards CSR activities, however, if the company fails to contribute, it is only required to specify reasons in its Board’s Report for that failure. There is no fine or penalty provided in the section for its failure to contribute towards CSR activities. Further no penalty has been specified for non-compliance of any of the provisions of section 135 of Companies Act, 2013 in the said section. However, in case of non-compliance of provisions there may be a penalty imposed on the company and every officer who is in default as per section 450 of the Companies Act, 2013 which deals with punishment where no specific penalty or punishment is provided.
Section 450 reads as follows:
“If a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made there under, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to ten thousand rupees, and where the contravention is continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues.”
The provisions of section 135 shall not be applicable for a period of five years from the commencement of business to following class of companies:
The amendments which have been brought about are as follows: