Applicability of Corporate Social Responsibility

   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 crore or more

during the immediately preceding 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.

A Company which is not required to appoint independent director under sub-section (4) of section 149 of the Companies Act, 2013, it shall have in its corporate social responsibility committee two or more directors.

The company which fulfils any one of the above criteria 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. The Net Pofits shall be calculated as per section 198 of the Companies Act,2013. Whereas if the company has not completed the period of three financial years since its incorporation then during immediately preceding financial years.

The company while spending the amount of corporate social responsibility shall give preference to the local areas where it operates. The examples of corporate social responsibility activities are promotion of education, eradicating hunger and poverty, steps towards environment sustainability.

Role of Corporate Social Responsibility Committee

1. Formulate and recommend to board the corporate social responsibility policy.

2. Ensure the corporate social responsibility activities duly undertaken by the Company.

3. Recommend the amount of expenditure to be incurred on the corporate social activities

4. Monitor the corporate social Responsibility policy from time to time.

The Board Report of the company shall disclose the composition of corporate social responsibility, its policy, implementation, expenditure, projects.

If a Company fails to spend the CSR amount, it shall in its board report specify the reason for not spending the amount.

Any amount remaining unspent in relation to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account.

PENAL PROVISION:

The company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

Activities which may be included by companies in their Corporate Social Responsibility Policies Activities – SCHEDULE VII – Section 135

(i) Eradicating hunger, poverty and malnutrition, ‘promoting health care including preventinve 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, agroforestry, 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 recognised 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 govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women;

(ix) Contribution to incubators funded by Central Government or State Government or any agency or Public Sector Undertaking of Central Government or State Government, and contributions to public funded Universities, Indian Institute of Technology (IITs), National Laboratories and Autonomous Bodies (established under the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence Research and Development Organisation (DRDO), Department of Science and Technology (DST), Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).

(x) rural development projects

(xi) slum area development.

Explanation.- For the purposes of this item, 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.

[(xii) disaster management, including relief, rehabilitation and reconstruction activities.

Author – CS Richa Srivastava from Delhi and can be contacted at csrichasrivastava1@gmail.com

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