2. CSR
Corporate Social
Responsibility (CSR) refers
to a business practice that
involves participating in
initiative that gives benefits
to the society..
The concept of CSR rests on the ideology
of businesses giving back to society as
they grow and benefit.
Companies take resources in the form of
raw materials, human resources etc. from
the society. By performing the task of
CSR activities, the companies are giving
something back to the society.
As commonly
misunderstood, the CSR is
not charity or mere
donations.
CSR is a way of conducting
business, by which
corporate entities visibly
contribute to the social
good.
The Term CSR was Coined first In 1953 by American Economist Howard
Bowen in his Publication named “Social Responsibilities of the Businessman”
He is often referred as the Father of CSR.
3. Highlights of CSR- Companies Act, 2013
Companies
Act,2013
On 29th August
2013, The Companies
Act 2013 replaced the
Companies Act of
1956.
Sec-135
The New Act has introduced
far-reaching changes that
affect company formation,
administration, and
governance, and incorporates
an additional section i.e.
Section 135.
In India, the Ministry of
Corporate Affairs,
Government of India
notified the Section 135 of
the Companies Act, 2013
along with Companies
(Corporate Social
Responsibility Policy)
Rules, 2014.
The mandatory CSR
provisions were
made effective from
1st April, 2014 for
companies with a
certain profit, turn-
over or valuation.
2013
2014
2014
2013
4. Applicable to CSR in India
Every
Company in India
•Its Holding Company
•Its Subsidiary Company
Foreign Company
Rs. 500 Crores
or
more
Rs. 1000 Crores
or
more
Rs. 5 Crores
or more
Its Net
worth
Its
Turnover
The provisions of CSR applies to:
Its
Net profit
CSR spend amounting to 2 % of their average annual profit over last three years.
The companies having the following in the preceding financial year:
5. Importance of CSR
• CSR improves the public image by publicizing the efforts towards a better society and increasing
their chance of becoming favourable in the eyes of consumers.
• CSR increases media coverage as media visibility throws a positive light on the organisation.
• CSR enhances the company’s brand value by building a socially strong relationship with
customers.
• CSR helps companies to stand out from the competition when companies are involved in any
kind of community.
Below reasons reflect why CSR is important:
6. CSR Committee Applicability
The CSR Committee should consist of 3 or more directors,
out of which at least 1 director must be an independent
director.
An unlisted public company or a private company shall
have its CSR Committee without any independent director
if an independent director is not required.
In the case of a foreign company, the CSR Committee shall comprise
of at least 2 persons of which one person shall be a person resident in
India authorized to accept on behalf of the foreign company – the
services of notices and other documents. Also, the other person shall
be nominated by the foreign company.
A private company having only two directors on its
Board shall constitute its CSR Committee with two
directors.
A company having any amount in its Unspent Corporate
Social Responsibility Account shall constitute a CSR
Committee and comply with the CSR provisions.
Every company to which CSR criteria are applicable shall constitute a Corporate Social
Responsibility (CSR) Committee.
7. List of Permitted CSR Activities
as per
Schedule-VII of Companies Act, 2013
8. Non- Permitted CSR Activities (Rule 2(d) of Companies
(Corporate Social Responsibility Policy) Rules, 2014)
Any activity undertaken by
the company outside India
except for training of Indian
sports personnel representing
any State or Union territory
at national level or India at
international level
Contribution of any
amount directly or
indirectly to any
political party
under section 182 of
the Act
Activities benefitting
employees of the
company as defined
in clause (k)
of section 2 of the
Code on Wages, 2019
(29 of 2019)
Activities are
undertaken in
pursuance of the
normal course of
business of the
company.
Activities supported by the
companies on sponsorship
basis for deriving
marketing benefits for its
products or services
Activities carried out for
fulfillment of any other
statutory obligations under
any law in force in India
9. Fines and Penalties for Non-Compliance
•In case a company fails to comply with the provisions relating to
CSR spending, transferring and utilising the unspent amount, the
company will be punishable with a minimum fine of Rs 50,000 which
may increase to Rs 25 lakhs.
Further, every officer of such company who defaults in the compliance will be
liable for a punishment which is imprisonment for a term which may extend to
three years or with a minimum fine of Rs 50,000 which may increase to Rs 5 lakh,
or with both.