PROVISIONS OF CORPORATE SOCIAL RESPONSIBILITY (CSR): SECTION 135

(A) Definition:

Corporate Social Responsibility (CSR)” means and includes but is not limited to:

(i)      Projects or programs relating to activities, areas or subjects specified in Schedule VII (Annexure A) to the Act or

(ii)     Projects or programs relating to activities undertaken by the board of directors of a company in pursuance of recommendations of the CSR Committee of the Board as per declared CSR Policy of the company subject to the condition that such policy will cover subjects enumerated in Schedule Vll (Annexure A) of the Act.

(B) Constitution of CSR Committee of the Board / Applicability:

 (1) 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 

(C) Composition of Corporate Social Responsibility Committee:

·         Three or more directors, out of which at least one director shall be an independent director or

·         two or more directors, where a company is not required to appoint an independent director under sub-section (4) of section 149,

(D) Role of the Corporate Social Responsibility Committee:

The Corporate Social Responsibility Committee shall

a)     formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in  Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

(E) Role of the Board:

The Board of every company referred to in sub-section (1) shall-

(a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

(F) Expenditure by the Company as CSR during the year:

The Board of every company referred to in sub-section (1), 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 or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:

(G) Disclosure in the Board report of the Company:

As per the section 134(3), the composition of the Corporate Social Responsibility Committee shall be disclosed in the Board's Report.

(H) Action required for NIL Expenditure by the Company as CSR during the year:

If the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.

Explanation.—For the purposes of this section "net profit" shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of  section 198.]

(I) Transfer of remaining unspent  to Unspent Corporate Social Responsibility Account:

Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in persuance 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, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.

(J) Provisions related to Non Compliance in spending CSR amount:

  

If a company contravenes the provisions of sub-section (5) or sub-section (6), 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 such 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.

The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions. [Section 135(8)]

(K) Non-Applicability of Corporate Social Responsibility (CSR) provisions:

Every company which ceases to be a company covered under this section of the Act for three consecutive financial years shall not be required to comply with the provisions of the Act, till the Company again falls in the eligibility criteria of CSR

(L) Schedule VII- Annexure A– Explaining Activities which will be considered as Corporate Social Responsibility Activities:

Annexure A

i. Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swachh 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 & orphans, setting up old age homes, day care centres & such other facilities for senior citizens & 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 dependants;

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;

xii. Disaster Management, including relief, rehabilitation and reconstruction activities;

DISCLAIMER: The Entire Contents of this document have been prepared on the basis of relevant provisions and information available at that time and prepared with due accuracy and reliability. But in no event, I will be liable for any damages caused in connection with the use of this information.

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Ravi Garg, ACS

Company Secretary & Compliance Officer            

csravi2014@gmail.com

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