In pursuit of Corporate Governance, Corporate excellence and better compliance with Provisions of the Companies Act, 2013 and rules made there under from time to time, the Ministry of Corporate Affairs has introduced sweeping changes in the way the corporate functions, change in role of stakeholders and professionals at large. One of the major sea change is introduction of E-Form CSR -1 introduced and mandatory applicable with effect from 1st April, 2021 to all the Registered Societies, Registered Trusts and Registered Section 8 Companies and other entities engaged in CSR (Corporate Social Responsibility) activities in India. The purpose of introducing this form seems to bring transparency in activities of Corporate Social Responsibilities activities by Society, Trust and Section 8 Company and to create a reliable databank for such a noble and social cause by corporate houses.
The purpose of this article is to keep ourselves updated and understand changes in CSR provisions. Section 135 of the Companies Act, 2013 is reproduced for reference and better understanding.
(1) Every company having net worth of rupees five hundred crore or more, or Turnover of rupees one thousand crore or more or a net profit of rupees five Crores or more during any financial year 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.
(2) The Board’s report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.
(3) The Corporate Social Responsibility Committee shall,—
(a) Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;
(b) Recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and
(c) Monitor the Corporate Social Responsibility Policy of the company from time to time.
(4) The Board of every company referred to in sub-section (1) shall,—
(a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed; and
(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company is undertaken by the company.
(5) The Board of every company referred to in sub-section (1), shall ensure that the Company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy: Provided that 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: Provided further that 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. Explanation.—For the purposes of this section “average net profit” shall be calculated in accordance with the provisions of section 198.
Schedule VII of the Companies Act, 2013 prescribes areas where companies/entities can contribute towards CSR (Corporate Social Responsibilities) activities.
1) Company established under Section 8 of the Companies Act, 2013 with Section 12A and Section 80G registrations under the Income Tax Act, 1961.
2) Registered Public Trust with Section 12A and Section 80G registrations under the Income Tax Act, 1961.
3) Company established under Section 8 of the Companies Act, 2013 or Registered Trust or Registered Society established by the Central Government or State Government.
4) Registered Society with Section 12A and Section 80G registrations under the Income Tax Act, 1961.
5) Entity established under an Act of Parliament or State Legislature.
It can be observed that Registration of an entity with respective Government authorities like Registration under Public Trust Act or Registration under Societies Registration Act or Registered under Companies Act, 2013 is a pre-requisite for registration as an entity in CSR-1 Form.
The next requirement of Form CSR-1 requires whether the entity is established by any company or group of companies. The purpose seems to identify Promoters or persons involved in registration of such entities. The details need to be mentioned in prescribed column. The identity of an entity can be established through CIN (Corporate Identity Number) a unique registration number which can be prefilled in given form. Registration number of Society or a trust need to be mentioned in given column.
If the aforesaid entities are not established by any company or group of companies, then the entity need to have an established track record of three years in undertaking similar activities need to be mentioned in form CSR-1.
Other Contents of Form CSR-1 includes Date of Incorporation/Registration of an Entity, Registered Office of an entity, Email address of an entity for confirmation of OTP (One time Password) and also for sending further communication, PAN Number of an entity and details of Directors, Board of trustees and authorized representative of an entity need to be mentioned in CSR-1 Form. These details help in ascertaining existence of an entity.
Copies of Certificate of Registration of respective entity self attested by authorized signatory of an entity need to be attached mandatorily. PAN of an entity self attested by authorized signatory of an entity need to be attached mandatorily.
Form CSR-1 need to be digitally signed by following persons:
a) Any one of the Directors of Section 8 Company
b) Any one of trustees of Registered Trust
c) By Chairperson/Secretary in case of Registered Society
d) Authorized Signatory in case of entity established under an Act of Parliament or State Legislature.
e) A Practising Professional like Chartered Accountant in Practice or a Cost Accountant in Practice or Company Secretary in Practice.
Once all details of form are correctly filled up and legible attachments are attached to form like PAN Card and Registration Certificate of an entity, it will be digitally signed and submitted. The Form is STP mode (Straight to process mode. When CSR -1 Form is successfully processed, an acknowledgement of the same is sent to the user in the form of an email to the email address of the entity. Further, a digitally signed approval letter along with CSR Registration number with Format CSRXXXXXXXX where X represents system generated unique sequential number will be sent to the User as well as the email address of the entity as mentioned in Form CSR-1 This unique CSR Registration Number will be quoted everywhere including letterhead of entity concerned. This will ensure CSR spent will be with authorized and registered entities with the Ministry of Corporate Affairs.
To conclude, the intention behind the Form CSR-1 seems to streamline, monitor and control the process of Corporate Social Responsibilities activates of corporate in a better and transparent manner thereby protecting society at large. The benefits of CSR (Corporate Social Responsibility) shall flow smoothly to larger section of society thereby achieving the very Objective of Corporate Social Responsibility of the Government.
Disclaimer: The Views expressed in this Article are based upon prevailing facts and Law to date and information available on MCA Site and views expressed are purely personal in nature. Readers are advised to seek expert opinion before arriving at a decision. You may reach me at [email protected]