Corporate social responsibility laws and status in India. Basic info.

1. CORPORATE SOCIAL RESPONSIBILITY–OVERVIEW OF THE SECTION 135, COMPANIES ACT, 2013
Gayatri Subramaniam
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2. Historic and Social Economic Context
Religious background
Charity and Philanthropy
Principle of Trusteeship
Social Responsibility -The Western Thought
Environmental Concerns
CSR and Beyond
Business Responsibility-A Holistic Approach

3. Government and Business Responsibility
2007
•PM’s Ten-Point Social Charter2009
•Voluntary Guidelines on CSR
2011
•National Voluntary Guidelines on Social, Environmental and Economic Responsibilities (NVGs) 2012
•SEBI mandate on disclosure in the form of Business Responsibility Reports (BRRs) on NVGs for top 100 listed companies
2013
•Section 135 of Companies’ Act, mandating CSR spend of 2% profit
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Ministry of Corporate Affairs & CSR

4. MILESTONES IN CSR2
1 Apr 2010 18 Dec 201208 Aug 201330 Aug2013
27 Feb
2014
•CompaniesBill 2013 approved by LokSabha
•DPE Guidelineson CSR
•CompaniesBill 2013 approved by RajyaSabha
•GazetteNotificationof the New Companies Act 2013
•Rules on section 135 Notified on MCA’S website
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5. CSR PROVISIONS OF THE COMPANIES ACT
SECTION135
1)Everycompanyhavinganetworthofrupeesfivehundredcroreormore(100million$ormore),oraturnoverofrupeesonethousandcroreormore(200million$ormore),oranetprofitofrupeesfivecroreormore(1million$ormore)duringanyfinancialyearshallconstituteaCorporateSocialResponsibilityCommitteeoftheBoardconsistingofthreeormoredirectors,outofwhichatleastonedirectorshallbeanindependentdirector;
2)TheBoard'sreportshalldisclosethecompositionoftheCorporateSocialResponsibilityCommittee.
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6. SECTION 135{CONTD.}
3)TheCorporateSocialResponsibilityCommitteeshall:
a.formulateandrecommendtotheBoard,aCorporateSocialResponsibilityPolicywhichshallindicatetheactivitiestobeundertakenbythecompanyasspecifiedinScheduleVII;
b.recommendtheamountofexpendituretobeincurredontheactivitiesreferredtoinclause(a);and
c.monitortheCorporateSocialResponsibilityPolicyofthecompanyfromtimetotime.
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7. SECTION 135{CONTD.}
4)TheBoardofeverycompanyreferredtoinsub-section(1)shall,
a)AftertakingintoaccounttherecommendationsmadebytheCorporateSocialResponsibilityCommittee,approvetheCorporateSocialResponsibilityPolicyforthecompanyanddisclosethecontentsofsuchPolicyinitsreportandalsoplaceitonthecompany'swebsite,ifany,insuchmannerasmaybeprescribed;and
b)ensurethattheactivitiesasareincludedinCorporateSocialResponsibilityPolicyofthecompanyareundertakenbythecompany.
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8. SECTION 135{CONTD.}
5)TheBoardofeverycompanyreferredtoinsub- section(1),shallensurethatthecompanyspends, ineveryfinancialyear,atleasttwopercentoftheaveragenetprofitsofthecompanymadeduringthethreeimmediatelyprecedingfinancialyears,inpursuanceofitsCorporateSocialResponsibilityPolicy.
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9. SECTION 135{CONTD.}
Providedthatthecompanyshallgivepreferencetothelocalareaandareasarounditwhereitoperates,forspendingtheamountearmarkedforCorporateSocialResponsibilityactivities;
Providedthatifthecompanyfailstospendsuchamount,theBoardshall,initsreportmadeunderclause(o)ofsub-section(3)ofsection134,specifythereasonsfornotspendingtheamount.
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10. CSR CommitteeThree or more directors with at least one independent
ROLEOF THE CSR COMMITTEE810Formulate and recommend a CSR policy to the boardRecommend activities and the amount of expenditure to be incurredMonitor the CSR policy

11. Role of the Board
Formulate a CSR CommitteeApprove the CSR Policy, disclose its contents in the Board Report and place it on the company's websiteEnsure Implementation of CSR activities
Ensure 2% spendDisclose reasons for not spending under clause (o) of sub -section (3) of Section 134911

12. Sub Section (8) of Section 134
Ifacompanycontravenestheprovisionsofthissectionclause(oofsub-section(3)ofSection134),thecompanyshallbepunishablewithfinewhichshallnotbelessthanfiftythousandrupeesbutwhichmayextendtotwenty-fivelakhrupeesandeveryofficerofthecompanywhoisindefaultshallbepunishablewithimprisonmentforatermwhichmayextendtothreeyearsorwithfinewhichshallnotbelessthanfiftythousandrupeesbutwhichmayextendtofivelakhrupees,orwithboth.
PENAL PROVISIONS for COMPANIES
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13. Schedule VII –CSR THEMATIC AREAS
1. Eradicating hunger, poverty and malnutrition, promoting health care, sanitation & safe drinking water including contribution to SwachaBharat kosh2. Promotion of education, special education and vocational skills3. Gender Equality, Women empowerment , senior citizens and economically backward groups4. Protection of National Heritage, art and culture
5. Benefits to armed forces veterans, war widows
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14. Schedule VII –CSR THEMATIC AREAS… 6. Ensuring environmental sustainability, ecological balance, wildlife & natural resources conservation including clean Ganga movement7. Technology incubators within academic institutions8. Rural sports, Paralympic and Olympic sports
9. PM National Relief Fund and any other funds setup by the Central Govt. for socio economic development & welfare of SC/ST/OBC
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15. 10.Rural Development Projects
11.Slum Development
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Schedule VII –CSR THEMATIC AREAS…

16. Schedule VII –CSR THEMATIC AREAS…
Promoting gender equality, empowering women, setting up homes and hostels for women and orphans, setting up old age homes, day care centers, and such other facilities for senior citizensand measures for reducing inequalities faced by socially and economically backward groups
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17. AMOUNT TO BE SPENT ON CSR
EverycompanywhichisfallingundertheCSRbracket,shouldspend,ineveryfinancialyear,atleasttwopercentoftheaveragenetprofits(section198)ofthecompanymadeduringthethreeprecedingfinancialyears.
Netprofitshouldnotinclude:-
Dividendreceivedfromothercompanies
Incomereceivedfromoverseas/foreignbranchesorsubsidiaries.
IncaseofForeignCompaniesthenetprofitofsuchcompanyshallbedeterminedaspertheprofitandlossaccountpreparedundersection381(1)(a)readwithsection198oftheCompaniesAct,2013.
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18. SURPLUS GENERATED FROM CSR ACTIVITIES
TheCSRPolicyofthecompanyshallspecifythatthesurplusarisingoutoftheCSRProjectsorprogramsoractivitiesshallnotformpartofthebusinessprofitofacompany.
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19. CSREXPENDITURE&MODESOFIMPLEMENTATION
CSRexpenditureshallincludeallexpenditureincludingcontributiontocorpusonprojectsorprogramsrelatingtoCSRactivitiesapprovedbytheBoardontherecommendationofitsCSRCommitteebutdoesnotincludeanyexpenditureonanitemnotinconformityornotinlinewithactivitieswhichfallwithinthepurviewoftheScheduleVIIoftheAct.
AcompanymayalsocollaboratewithothercompaniesforundertakingprojectsorprogramsorCSRactivitiesinsuchamannerthattheCSRCommitteesofrespectivecompaniesareinapositiontoreportseparatelyonsuchprojectsorprogramsinaccordancewiththeserules.
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20. MACRO PICTURE -SIZE OF THE CSR SPACE
Around16,000companiesfallwithinthepurviewofSection135;
Around₹20,000croresintotal,willbespentbyCorporatesincurrentFYonCSR;
148CPSUs*willcontributeCSRspendtothetuneofapprox₹3378cr.;
184SLPEs**willcontributeCSRspendtothetuneofapprox₹263cr;
Therestareprivatesectorcompanies.
Around25pcwouldbecontributedbyPSUs
13* CPSU-Central Public Sector Undertaking* * SLPE-State Level Public Enterprises

21. METHOD OF IMPLEMENTATION OF CSR
TheBoardofacompanymaydecidetoundertakeitsCSRactivitiesapprovedbytheCSRCommittee,throughanyofthefollowingthreeagencies:
Aregisteredtrust
Aregisteredsociety
ASection8company
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22. METHOD OF IMPLEMENTATION OF CSR (CONT’D)
Providedthat:
Ifsuchtrust,societyorcompanyisnotestablishedbythecompanyoritsholdingorsubsidiaryorassociatecompany,itshallhaveanestablishedtrackrecordofthreeyearsinundertakingsimilarprojectsorprograms;
Thecompanyhasspecifiedtheprojectorprogramstobeundertakenthroughtheseentities,themodalitiesofutilizationoffundsonsuchprojectsandprogramsandthemonitoringandreportingmechanism.
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23. ACTIVITIES NOTADMISSIBLE AS CSR
TheCSRprojectsthatbenefitonlytheemployeesofthecompanyandtheirfamiliesshallnotbeconsideredasCSRactivitiesinaccordancewithsection135oftheAct(rule4(5));
One-offeventssuchasmarathons/awards/ charitablecontribution/advertisement/ sponsorshipsofTVprogrammesetc.wouldnotbequalifiedaspartofCSRexpenditure(MCAcirculardated18-06-14);
Activitieswhicharenottakenupinprojectmode(rule4(1))
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24. ACTIVITIES NOTADMISSIBLE AS CSR CONTD:
ExpensesincurredbycompaniesforthefulfillmentofanyAct/Statuteofregulations(suchasLabourLaws,LandAcquisitionActetc.)wouldnotcountasCSRexpenditureundertheCompaniesAct;
ContributionofanyamountdirectlyorindirectlytoanypoliticalpartyshallnotbeconsideredasaCSRactivity;
ActivitiesundertakenbythecompanyinpursuanceofitsnormalcourseofbusinesswillnotbeconsideredasfulfillmentofCSRobligation.
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25. Companiesmayincurexpenditureupto5percentoftheirCSRbudgetsforbuildingCSRcapacitiesoftheirownpersonnelaswellasofthoseoftheirimplementingagencies,;
Mustbedonethroughinstitutionswithestablishedtrackrecordsofatleast3years.
CSR EXPENDITURE ON CAPACITY BUILDING
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26. 1. SrNo.
2.
CSR project/ activity identified
3.
Sector in which the project is covered
4.
Projects/ Progra- mmes
1.Local
areas/
others
1.Specify
the state/ district
5.
Amount outlay (budget) project/ programme wise
6.
Amount spent on the programme / project
Subheads
1.Direct
Expenditure
on projects
2.Over heads
7.
Cumulative spend up to the reporting period
8.
Amount
spent
Direct
or
through
Implem-
enting
agency*
26REPORTING TEMPLATE
* Give details of Implementing Agency
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27. Signed
…………………………………………..
(CEO/Managing Director/Director)
……………………………………
(Chairman CSR Committee)
……………………………………
(Person specified under clause (d) of sub-section (1) of section 380 of the Act) (wherever applicable)
Reporting on CSR Initiatives
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28. ProjectMode;
One-offevents;
ScheduleVIImustbeinterpretedliberallysoastocapturetheessenceofthesubjectsenumeratedtherein;
Beyondcompliance;
Supplementing&complementing(butnotduplicating)govt.schemes&programswillcountasCSR;
Contribution to Corpusof a Trust/Scoeity/Section 8 companies will qualify as CSR as long as that body is created exclusively for a purpose directly relatable to a subject covered in Schedule VII.
CLARIFICATIONS IN MCA CIRCULAR (18.06.2014)
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29. A CSR project needs to haveBaseline survey Duration of the ProjectAmount allocated to the Project
Amount allocated to the Project in current FY
Start Date / End Date
Monitoring and Documentation
Objective Evaluation

30. 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
Preparation of reporting format and placement in public domain
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4Identifying the Implementing Agencies (conducting due diligence, if required)
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Project approval – insertion of the approved projects in the policy
Evaluation (Concurrent, Final & preferably Third Party)
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31. THANK YOU Let us show that we do care
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