Corporate Social Responsibility - Section 135 of Companies Act, 2013
•Download as PPTX, PDF•
6 likes•3,170 views
Corporate social responsibility (CSR) refers to companies behaving ethically and contributing to economic development while improving quality of life, according to Lord Holme and Richard Watts. The document outlines the steps companies must take to comply with Section 135 of the Indian Companies Act, including constituting a CSR committee and formulating a CSR policy. Applicable companies must spend at least 2% of their average net profits over the past three years on CSR activities listed in Schedule VII, such as contributions to cleanliness funds. While CSR requires management efforts, it ultimately benefits society and the environment.
More Related Content
What's hot
What's hot (20)
Viewers also liked
Viewers also liked (12)
Similar to Corporate Social Responsibility - Section 135 of Companies Act, 2013
Similar to Corporate Social Responsibility - Section 135 of Companies Act, 2013 (20)
Recently uploaded
Recently uploaded (20)
Corporate Social Responsibility - Section 135 of Companies Act, 2013
- 2. What is CSR? Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large” -Lord Holme and Richard Watts
- 3. There are 3 steps by following which Section 135 can be complied with:-
- 4. Step 1 • Check: Does Company Attract the provision of Sec 135? IF YES NO STOP
- 5. Step 2 • Constitute CSR Committee. Step 3 • Formulate and recommend CSR policy to the board Step 4 • Monitor the policy time to time and ensure implementation.
- 6. Sec 135: Applicable to companies which have:- • Net Profit • Net Worth • Turnover >or= >or= >or= 5 500 1000 Crore Crore Crore N N T 5 500 1000
- 8. Formation of CSR Committee:- • Should have at least 3 Directors. • For listed companies: out of 3 at least 1 director, should be independent director. • A private limited company having only two directors on its Board shall constitute its CSR Committee with its two such directors.
- 9. How much to spend? • At least 2% of the AVERAGE NET PROFIT in 3 immediately preceding FY. NET PROFIT = Profit as per New Act (-) Profits from Operations outside India (-) Dividend received from Indian Company that has already expended in CSR Logic: Promote Indian companies to expand operations abroad. Logic: Dividend itself is a part of profit. Shareholders need not spend on CSR separately.
- 10. SCHEDULE VII
- 11. Points to remember • Any contribution to political parties is disqualified. • Any project which benefit only the employees or their families shall be disqualified. • Any activity undertaken during the normal course of its business is disqualified.
- 12. MOST RECENT ADDITION BY OUR DEAR PRIME MINISTER, MR. NARENDRA MODI Contributions to Swach Bharat Kosh and Clean Ganga Fund come under CSR ambit
- 13. Reporting Requirements • The details of the following shall be annually reported:- • CSR policy, • the composition of the CSR committee, • the amount CSR expenditures, • specifics of individual CSR projects • A mention of the CSR projects on Companies Website • No Penalties on non-compliance, just disclose a valid reason in annual statements.
- 14. Section 135 ?
- 15. Why a bane? • Management Burden: Division if concentration from core operations • Financial Burden: Companies might have to compromise on their capital expenditure • Shareholders Wealth Erosion • Sometimes merely a marketing gimmick
- 16. Out of so many options what is the easiest way of compliance? DONATION IN PRIME MINISTER’S RELIEF FUND • Benefits:- – 100% Tax Exemption – No Managerial Burden – No Accountability
- 17. And Why a boon? • Privatization of Social Welfare – More effective, more efficient • Healthier Environment and People • Progressive in nature • Empowerment of the weak • Bringing out the unused potential of youth
- 18. Conclusion • 2% is no big deal for one corporate. However, when all companies will contribute 2% each, it will be a huge support for our country’s poor. • CSR is here to stay. It is the need of the hour of our country and hence we should be finding ways to adhere to it and not dodge it. • Whenever there are some changes around us, it is our natural tendency to resist it, even when the change is for good. But resisting changes will lead us no where. We all have to accept that change is the only constant. We should be optimistic and make opportunities. For example…..
- 19. When a child is made to go to school the first time…. And in extreme cases…
- 20. But for Optimistic People Opportunity is every where! And in extreme cases…
- 21. TATA’s CSR Initiatives • Corporate Social Responsibility – Tata Steel Rural Development Society (TSRDS) – Tribal Cultural Society (TCS) – Tata Steel Family Initiatives Foundation (TSFIF) – Tata Steel Skill Development Society (TSSDS) – Education • Medical Services • Urban Services • Sports Department • Tata Steel Adventure Foundation • JUSCO • Other societies like Ardeshir Dalal Memorial Hospital, Blood Banks, Kanti Lal Gandhi Memorial Hospital etc.) • Tata Relief Committee
- 22. Other Companies Actively Contributing in CSR Initiatives
- 23. Thank You Everyone And Please … Keep Smiling!
- 24. Made By SAHIL GOEL CRO-0488863 Ph. 9891516946 Mail – sahil _goel_student@yahoo.co.in Follow me at: bizleft.blogspot.com/ facebook.com/sahil1294
Editor's Notes
- In 1987, a 74- years old rickshaw puller named Bai Fangli, came back to his hometown planning to retire from his back-breaking job. There, he saw children working in the field, because they were too poor to afford school fees. Bai felt very sorry for them and wanted to help them. He thought what he could do and in the end understood that he could do nothing except being a rickshaw puller. Bai went back to work as a rickshaw puller. He took a modest accommodation next to the railway station, ate simple food and wore only discarded secondhand clothes. All the money he saved was given to support children who could not afford education. You all would be surprised to know, Ladies and Gentlemen, that this man worked for to support those children until he was 90 years old. And in these 16 years, he contributed 3 Lakh and 50,000 Yuan i.e equal to nearly 35 Lakh INR. He helped nearly 300 poor students to continue with their studies.
- Firstly what CSR is. There is no definition given in the act. But various scholars have given there own definition, which are perfect for explanation. The definition by Lorde Holme has three main key words, they are:- Continuing commitment Behaving ethically and economic development Cover society at large
- First step is to check that whether the section is applicable on the company or not. If no, then there is no statutory requirement for the company to do any CSR initiative. If yes then the company shall further follow step 2.
- Step 2 is to make a committee. Step 3 is to make and recommend policies Step 4 is their implementation and monitoring
- Any entity with:- N-5 N-500 T-1000 Two things that re to be kept in mind are:- Conjunction “OR”: Even if any 1 limit is reached, whole of the section is applicable And other is: Greater than or equal to sign There is a short mnemonic code for easy memorisation. (.Where there as a N, there is a 5.) Next step is the formation of CSR Committee
- CSR committee is very similar to a committee like Board of directors. Infact some member of BOD itself are selected to form CSR Committee.
- Formation of CSR Committee:- It must have at least 3 directors in this committee For listed companies out of these three atleast 1 should be independent, these directors are same as the directors in the BOD of company Now you must be thinking that what about the private companies who do have only two directors? For such cases, Rules for CSR were released by MCA which clearly stated that such private companies may form CSR committee with only 2 directors. Now coming to the function of CSR Committee, its functions are making CSR policy, recommending it to BOD, BOD if satisfied accepts those policies, if not then the policies are reviewed and implemented. Then CSR Committee also have to check and ensure proper implementation. The next issue is that how much will the company has to spend:-
- The company on which section 135 is applicable has to spend atleast 2% of the AVG net profit of immediately preceding 3 years. And the definition of net profit for this section is – Profit as per Companies Act 2013 Less: Profits from operations outside India – Less: dividend from Indian companies which have already expended in CSR Now if we think why we have subtracted it then we get 2 simple logics:- The logic is to promote Indian companies to expand their business network outside India too 2) The logic is that dividend itself is a share of profits and if the company who is sharing it profits has already expended on CSR, then its share holders shall not be required to spend again Next we have to understand
- The Companies Act 2013, contains Schedule VII in it that gives the list of areas in which the companies can spend. Any expenditure other than in these areas will be disqualified for any benefit:- Reduce economic disparities – Poverty Eradication Privatize social development – sanitation, education, health prevention Educate and Empower the weak – Women and Children Even development of country – responsibility to develop villages has been given to pvt sector
- -Any money given to political parties will be disqualified because the company making such payment will definitely be expecting some favours from the political party. Secondly,any project that benfits only the employees or their familes is similar to giving salary to employees fro their services and hence even suc activities are disallowed. Thirdly, whatever activity is taken up shall be different from normal course of business. For eg. A food maufacturing company cannot fullfill its CSR merely by distributing free food to public, it would be like distributing samples to public. So, a food company can maybe teach children but not distribute food.
- The companies on which section 135 is applicable as per step 1, shall disclose all details regarding CSR Policy, committee, projects and expenditure. Next there is a debate in the industry and that is There is an interesting point to note that even though compliance with S. 135 has been made mandatory but there are no penalties applicable in case a company fails to comply, such company shall only disclose the reason for non-compliance in annual statements.
- Whether section 135 is a boon or a bane? So, before coming to the conclusions lets see some arguments- 1) Firstly argument against S. 135 are
- It will be a managerial and financial burden, Secondly, the money that is used in fulfillment is shareholders money Thirdly, at times CSR becomes merely a marketing gimmick with no real benefits Now if we look at the positive sides
- With csr social welfare is privatized and hence
- But for optimistic people, opportunity is everywhere…….. And in extreme cases…. No need not say anything else So similarly, lets search for the opportunity in CSR and not dodge it. I finish here and I am thankful to you all for being a patient audience.