Corporate Social Responsibility [S.135]

Applicability to
[S.135(1), R.3(1)]

Every company having

• net worth [S.2(57)] 500 crores, or
• turnover [S.2(91)] 1000 crores or
• a net profit [R.2(1)(f) of CSR Rules] 5 crores

during ⁷any financial year

including its Hold Co / Sub Co, and a foreign Co defined u/s 2(42) of Co Act 2013 having its BO / PO in India

Immediate Action to be taken by such Co [S.135(1)]

constitute a CSR committee of BoDconsisting of ⁸ ≥ 3 directors, out of which at least 1 director should be an ID

CSR Committee

[R.3(5)]

Role of CSR Committee [S.135(3), R.5(2)]

• formulate and recommend to the Board, a CSR Policy indicating the activities to be undertaken by the Co as specified in Schedule VII;
• recommend the amount of expenditure to be incurred on the activities referred to above; and
• monitor CSR Policy of the Co from time to time
  • institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the Co

CSR Policy contents [R.6]

• A list of CSR projects / programs, specifying modalities of execution of such project / programs and implementation schedules for the same
  • excluding the activities undertaken in pursuance of normal course of business of a Co
• Monitoring process of such projects or programs
• specify that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a Co

CSR activities should be

[R.4, Sch VII]

• as per CSR Policy
• as projects / programs / activities (new or ongoing) in India only
• approved by the CSR Committee
• undertaken through a registered trust / a registered society / a S. 8 Co
  • established by the Co / its HoldCo / SubCo / or Asct Co or otherwise, or
  • established by CG / SG, or any entity established under an Act of Parliament / State legislature
  • other than mentioned above
• if such trust / society / S. 8 Co has an established track record of 3 years in undertaking similar programs /projects
• the Co has specified the projects or programs to be undertaken, the modalities of utilization funds of such projects and programs and the monitoring and reporting mechanism

A company may also collaborate with other companies for undertaking projects / programs / CSR activities in such a manner that the CSR Committees of respective companies are in a position to report separately on such projects / programs in accordance with CSR rules

Cap on admin expenditure

• Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least 3 financial years but such expenditure including expenditure on administrative overheads, shall not > 5% of total CSR expenditure of the company in 1FY

Activities NOT considered as CSR activities [R.4(6),(7)]

• activities undertaken in pursuance of its normal course of business
• those which benefit only the employees of the Co and their families
• Contribution of any amount directly or indirectly to any political party u/s 182 of Co Act 2013

Responsibility of Board

[S.135(4), (5)&R.6(1) 2nd proviso]

• after taking into account the recommendations made by the CSR Committee, approve the CSR Policy for the Co;
• ensure that the activities included in CSR Policy of the Co are :
  • related to the activities included in Schedule VII of Co Act 2013
  • undertaken by the Co
• Co spends, in every FY, at least 2% of the average net profits of the Co made during 3 immediately preceding FY, in pursuance of its CSR Policy
  • preference to the local area and areas around it where it operates
  • if the Co fails to spend such amount → the Board’ report should specify the reasons for not spending the amount

CSR Reporting

[S.135(2), R.8]

Display of CSR activities on its website [R.9]

• Disclose contents of such policy in Board’s report
• Display the same on the Co’s website, if any

Co ceasing to be covered u/s 135 [R.3(2)]

Every Co which ceases to be covered u/s 135(1) of Co Act 2013 for 3 consecutive FYs shall not be required to –

1. Constitute a CSR Committee; and
2. Comply with the provisions S.135 (2) to (5);

till such time it meets the criteria specified in S.135(1)

CSR activities [Sch VII]

Activities relating to:—

1. eradicating hunger, poverty and malnutrition, promoting preventive healthcare and sanitation and making available safe drinking water;
2. promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects;
3. 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 citizens and measures for reducing inequalities faced by socially and economically backwards groups;
4. ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro forestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set up by CG for rejuvenation of river Ganga;
5. 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 arts and handicrafts;
6. Measures for the benefit of armed forces veterans, war widows and their dependents;
7. Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports;
8. contribution to the Prime Minister's National Relief Fund or any other fund set up by CG for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and
9. Contributions or funds provided to technology incubators located within academic institutions which are approved by CG;
10. Rural development projects
11. Slum area development