Corporate Social Responsibility or CSR is a business model that company follows to integrate social and environmental concerns in their business operations. CSR is Company’s effort to pay back the stakeholders and public , who contributed in their growth and success. CSR cannot be termed as charity. It is a way to make social good towards various aspects of society and environment. CSR also helps company to make brand name towards its customers and also bolsters the goodwill & growth amongst the general public.
Ministry of Corporate Affairs (MCA) has made Corporate Social Responsibility mandatory for certain class of Companies from 01.04.2014 as per the provisions of Section 135 of Companies Act 2013 along with Companies(Corporate Social Responsibility Rules) 2014 & Schedule VII.
APPLICABILITY OF CSR
Every Company including its holding & subsidiary company having
1) Net worth of Rupees 500 Crores or more, or
2) Turnover of Rupees One Thousand Crores or more, or
3) Net profit of Rupees 5 crores or more.
* Every Foreign company defined under section 2(42) of the Act having its branch office or project office in India which fulfills the above criteria shall comply with the provision of Section 135 of the Act along with rules.
Every class of Company mentioned above has to constitute a Corporate Social Responsibility Committee comprising three directors about of whom One should be independent director.
* In case of Unlisted Public Company or Private Company which is not required to appoint independent directors, can constitute Corporate Social Responsibility Committee without such director.
* In case of Private Company where there are only two directors can constitute Corporate Social Responsibility Committee with only two directors.
* In case of Foreign Company, Corporate Social Responsibility Committee shall be constituted by atleast two persons, one person should be its authorized person resident in India [Section 380(1)(d))] and another person shall be nominated by foreign Company.
DUTIES OF CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
1. Formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule VII.
2. Recommend the amount of expenditure to be incurred on the activities referred to in clause (i)
3. Monitor the CSR Policy of the company from time to time,
4. Institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.
ROLE OF BOARD OF DIRECTORS
The Board of every Company shall
1) after taking account the recommendation from CSR committee, approve the CSR activities and disclose the contents of the same in the Board Report and the same shall be displayed on Company’s website, if any.
2) ensure that the activities as are included in CSR Policy are undertaken by the Company.
3) ensure that the Company spends atleast two percent of average net profit made during the three immediately preceding financial years.
* If company fails to spend such amount, it shall disclose it in the Board Report and specify the reasons for not spending the amount.
(1) The CSR activities shall be undertaken by the company, as per its stated CSR Policy, , 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 registered trust, society ,its holding , subsidiary, a company established by the company or associate company under section 8 of the Act or otherwise:
* if such trust, society or company is not established by the company or its holding or subsidiary or associate company, it shall have an established track record of three years in undertaking similar programs or projects;
(3) The Company may 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.
(4) The CSR projects or programs or activities undertaken in India only to the amount of CSR expenditure.
(5) The CSR projects or programs or activities that benefit only the employees of the company and their families cannot be considered as CSR activities as per the Act.
(6) Contribution either directly or indirectly to political parties cannot be considered as CSR activities.
The CSR Policy of the company shall, , include the following
(a) a list of CSR projects or programs which a company plans to undertake falling under the Schedule VII of the Act,
(b) monitoring process of such projects or programs
(c) that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of company.
The Company should give preference to local area and area around it where it operates, for spending the amount earmarked for Corporate Social Responsibility.
The Board’s Report of a company on which CSR is applicable shall include an annual report on CSR containing particulars of CSR Activities
In case of a foreign company, the balance sheet filed under shall contain Annexure regarding report on CSR.
For further clarification, drop email at [email protected]