Gayatri SubramaniamIndian Institute of Corporate Affairs

CORPORATE SOCIAL RESPONSIBILITY

An overview of the Companies Act, 2013

EVOLUTION OF CSR

Corporate profit

Philanthropy

Strategic Community investment

Good corporate citizenship

Pure self interest

Passive donations to charities

Investment in social development as part of the Business plan (NVGs)

We are getting here

Section 135 Compliance

Strategic giving linked to business interest

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FROM CORPORATE RESPONSIBILITY TO CORPORATE SOCIAL RESPONSIBILITY

Staff welfare

Welfare of staff families

Immediate Community development

Nation Building

Occupational safety

School for staff children, sanitation in staff colonies etc.

Sanitation, education, environment

Compliance to 135

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GOVERNMENT & CSR

• DPE Guidelines

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MILESTONES IN CSR

The New Companies Act 2013

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► 16,000 Companies

► 18,000 Crores Indian Rupees

► 30,000 Directors of Boards

THE SIZE OF THE CSR SPACE – APPROXIMATELY

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QUALIFYING CRITERIA Section 135, sub-section 1 of the Companies Act,

2013 provides the qualifying criteria; Every company having i. net worth of rupees five hundred crore or more, ii.or turnover of rupees one thousand crore or

more,iii.or a net profit of rupees five crore or more

during any financial year is mandated to constitute a Corporate Social Responsibility Committee of the Board.

Any financial year refers to any of the three preceding financial years. 8

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COMPOSITION OF CSR COMMITTEE

A Corporate Social Responsibility Committee of the Board consists of three or more directors, out of which at least one director shall be an independent director.

An unlisted public company or a private company covered under Section 135(1) of the Act, which is not required to appoint an independent director, shall have its CSR Committee without such director .

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COMPOSITION OF CSR COMMITTEE (CONT’D)

A private company with two directors on Board should constitute its CSR Committee with only two directors;

The CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.

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BOARD AND THE COMMITTEE

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CSR PROJECT/PROGRAMME

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CSR PROJECT: IMPLEMENTATION

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SCHEDULE VII – CSR THEMATIC AREAS

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Provisions apply to every Indian company including its holding company or subsidiary company;

Surplus arising out of the CSR Projects or programs or activities shall not form part of the business profit of a company;

CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure.

RULES EFFCETIVE FROM 1st APRIL’2014

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Section 135 applies to foreign companies having their branches or project offices in India;

Net profit of such companies shall be determined as per the profit and loss account prepared under section 381(1)(a) read with section 198 of the Companies Act, 2013;

CSR Committees of such companies shall comprise of at least two persons of which one shall be as specified under clause (d) of sub-section (1) of section 380 of the Act and another person to be nominated by the foreign company.

PROVISIONS for FOREIGN COMPANIES

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The policy shall include a list of CSR projects or programs which a company plans to undertake falling within the purview of the Schedule VII of the Act, specifying modalities of execution of such projects or programs and implementation schedules for the same;

It will also elaborate the Monitoring process for such projects or programs.

CSR POLICY

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CSR expenditure shall include all expenditure including contribution to corpuses of trusts/societies/section 8 companies which are created exclusively for undertaking CSR activities or for purposes directly relatable to a subject covered in Schedule VII;

A company cannot make any contribution to any political party or political purpose.

CSR EXPENDITURE

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Activities undertaken in pursuance of the normal course of business of the company will not count as CSR;

CSR Projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities.

CSR EXPENDITURE

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For building CSR capacities of their own personnel as well as of those of their implementing agencies, companies may incur expenditure up to 5 per cent of their CSR budgets;

Must be done through institutions with established track records of at least 3 years.

CSR EXPENDITURE ON CAPACITY BUILDING

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COLLABORATION AMONG COMPANIES FOR IMPLEMENTING CSR

A company may also collaborate with other companies for undertaking projects or programs or CSR activities;

Provided CSR Committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.

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THE SECTION 135: IMPLEMENTATION PROCESSDeveloping a CSR Strategy Operationalizing the

institutional mechanism – team identification &

capacity building Identifying the Implementing Agencies

(conducting due diligence, if required) Project Development –

Detailed Project Report (DPR)Clear identification of CSR

Budget

Finalizing agreement with the implementing agency

Documentation, Monitoring (at Board and

Sub-board level)

Project Implementation

Project impact assessment

Project impact assessment

Preparation of reporting format and placement in

public domain

Preparation of reporting format and placement in

public domain

1

3

5

2

4

Identifying the Implementing Agencies

(conducting due diligence, if required)

3

6

9

7

Project approval – insertion of the approved

projects in the policy

Evaluation (Concurrent, Final & preferably Third

Party)

8

10

Let us show that we do care

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