Sunday, 2 February 2014

PROVISION OF CSR IN THE NEW COMPANIES BILL 2013 IN INDIA

MANDATORY SPENDING ON CSR

Till date it is very difficult exercise to analyze the spending of CSR by various firms and private companies and such information is not maintained at government level, even among the top 100 firms by revenue, there are many who don’t report their CSR spends or even declare the social causes they support, that isbecause they are not required to do so by law and no provisions for CSR exists in the Companies Act, 1956 so currently the Ministry does not maintain such details. But all that will change when the new Companies Bill, 2012 (which was already been passed by the Lok Sabha) becomes a law.

The Companies Bill, 2012 incorporates a provision of CSR under Clause 135 which states that every company having
• net worth Rs. 500 crore or more,
• or a turnover of Rs. 1000 crore or more,
• or a net profit of rupees five crore or more
during any financial year, shall constitute a CSR Committee of the Board consisting of three or more Directors, including at least one Independent Director, to recommend activities for discharging corporate social responsibilities in such a manner that the company would spend AT LEAST 2 PERCENT OF ITS AVERAGE NET PROFITS OF THE PREVIOUS THREE YEARS on specified CSR activities.

According to Schedule-VII of Companies Bill, 2013 the following activities can be included by companies in their CSR Policies:-
i. Eradicating extreme hunger and poverty;
ii. Promotion of education;
iii. Promoting gender equality and empowering women;
iv. Reducing child mortality and improving maternal health;
v. combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases;
vi. ensuring environmental sustainability;
vii. employment enhancing vocational skills;
viii. social business projects;
ix. contribution to the Prime Minister’s National Relief Fund or any other fund set by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Caste, the Scheduled Tribes, other backward classes, minorities and women; and
x. such other matters as may be prescribed.

The Companies Bill, 2013, Clause 135 also provides for constitution of a CSR Committee of the Board. The CSR Committee is required to;
a. Formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the company as 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.
d. The format for disclosure of CSR policy and the activities therein as part of Board’s report will be prescribed in the rules once the Bill is enacted.

The Compliance Period of such mandatory spending on CSR will commence on 1st April, 2014. And, it is estimated that 22,000 crores of rupees will be spent by such companies in the next financial year (2014-15). Hence, it is time to gear up for partnering with CSR wings of the corporate for your chosen area of activity from among the list provided above.