India’s new Companies Act 2013 (Companies Act) has introduced several new provisions which change the face of Indian corporate business. One of such new provisions is Corporate Social Responsibility (CSR). The concept of CSR rests on the ideology of give and take. 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. Ministry of Corporate Affairs has recently notified Section 135 and Schedule VII of the Companies Act as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014 (CRS Rules) which has come into effect from 1 April 2014. In the following paragraphs, I will discuss various aspects of CSR activities.
The following companies are required to constitute CSR committee –
If any of the above financial strength criteria is met, the CSR provisions and related rules will be applicable to the company. These companies are required to form CSR committee consisting of its directors. This committee oversees the entire CSR activities.
The board plays an important role in CSR activities. The role of Board are as follows –
It’s important to note that there is no penalty if the specified amount is not spend on CSR activities. In such case, the board’s report should specify the reason for such short spending.
Few important points of CSR spending are as follows –
As per schedule VII, the following activities may be included by companies in their CSR policies:
Net Profit means the net profit of a company as per its financial statement prepared in accordance with
Section 198 of the Act, but shall not include the following, namely: ‐
Following shall not be considered as expenditure:
The new Companies Act 2013 was much awaited. With the new Act coming into force, lots of new provisions came in picture. One such new provision was relating to CSR activities. This provision was much debated. Many companies said that this new provision will create financial burden on them as they need to spend specified percentage of their profits. Now, since the new Act is in force, every company is following the new regulation. Considering the intent of law that companies take so many resources from society they should give back something to it, the provision of CSR is justified. Also there are few good points for Companies like:
Also the above spending will help in benefitting the underprivileged who are deprived of basic necessities. Since the new provision is only one and half year old, it is difficult to analyze its benefit. But in long run the society as a whole would surely stand benefitted from it. In cost benefit analysis of this provision, its sure that its benefit will exceed its cost.
With new CSR regulation, the task of Companies has increased. They are not only required to spend money but are also required to follow the disclosure and other statutory requirement. It would take some time for companies to get used to these new regulations. But this new regulations is good from social equality and development of underprivileged. As far as these new regulation benefits society in large, it’s always welcome.
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