CORPORATE SOCIAL RESPONSIBILITY An overview of the Companies Act, 2013

1. CORPORATE SOCIAL RESPONSIBILITY An overview of the Companies Act, 2013 Gayatri Subramaniam Indian Institute of Corporate Affairs

2. EVOLUTION OF CSR We are getting here Section 135 Compliance Investment in social development as part of the Business plan (NVGs) Good corporate citizenship Strategic giving linked to business interest Strategic Community investment Passive donations to charities Philanthropy Pure self interest Corporate profit

3. FROM CORPORATE RESPONSIBILITY TO CORPORATE SOCIAL RESPONSIBILITY Compliance to 135 Nation Building Immediate Community development Sanitation, education, environment School for staff children, sanitation in staff colonies etc. Welfare of staff families Staff welfare Occupational safety

4. GOVERNMENT & CSR • DPE Guidelines

5. MILESTONES IN CSR The New Companies Act 2013

6. THE SIZE OF THE CSR SPACE – APPROXIMATELY • 16,000 Companies • 18,000 Crores Indian Rupees • 30,000 Directors of Boards

7. QUALIFYING CRITERIA • Section 135, sub-section 1 of the Companies Act, 2013 provides the qualifying criteria; • 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 any financial year is mandated to constitute a Corporate Social Responsibility Committee of the Board. Any financial year refers to any of the three preceding financial years. 8

8. COMPOSITION OF CSR COMMITTEE A Corporate Social Responsibility Committee of the Board consists of three or more directors, out of which at least one director shall be an independent director. • An unlisted public company or a private company covered under Section 135(1) of the Act, which is not required to appoint an independent director, shall have its CSR Committee without such director .

9. COMPOSITION OF CSR COMMITTEE (CONT’D) • A private company with two directors on Board should constitute its CSR Committee with only two directors; • The CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.

10. BOARD AND THE COMMITTEE

11. CSR PROJECT/PROGRAMME

12. CSR PROJECT: IMPLEMENTATION

13. SCHEDULE VII – CSR THEMATIC AREAS

14. RULES EFFCETIVE FROM 1st APRIL’2014 • Provisions apply to every Indian company including its holding company or subsidiary company; • Surplus arising out of the CSR Projects or programs or activities shall not form part of the business profit of a company; • CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure.

15. PROVISIONS for FOREIGN COMPANIES • Section 135 applies to foreign companies having their branches or project offices in India; • Net profit of such companies shall be determined as per the profit and loss account prepared under section 381(1)(a) read with section 198 of the Companies Act, 2013; • CSR Committees of such companies shall comprise of at least two persons of which one shall be as specified under clause (d) of sub-section (1) of section 380 of the Act and another person to be nominated by the foreign company.

16. CSR POLICY • The policy shall include a list of CSR projects or programs which a company plans to undertake falling within the purview of the Schedule VII of the Act, specifying modalities of execution of such projects or programs and implementation schedules for the same; • It will also elaborate the Monitoring process for such projects or programs.

17. CSR EXPENDITURE • CSR expenditure shall include all expenditure including contribution to corpuses of trusts/societies/section 8 companies which are created exclusively for undertaking CSR activities or for purposes directly relatable to a subject covered in Schedule VII; • A company cannot make any contribution to any political party or political purpose.

18. CSR EXPENDITURE • Activities undertaken in pursuance of the normal course of businessof the company will not count as CSR; • CSR Projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities.

19. CSR EXPENDITURE ON CAPACITY BUILDING • For building CSR capacities of their own personnel as well as of those of their implementing agencies, companies may incur expenditure up to 5 per cent of their CSR budgets; • Must be done through institutions with established track records of at least 3 years.

20. COLLABORATION AMONG COMPANIES FOR IMPLEMENTING CSR • A company may also collaborate with other companies for undertaking projects or programs or CSR activities; • Provided CSR Committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.

21. THE SECTION 135: IMPLEMENTATION PROCESS Operationalizing the institutional mechanism – team identification & capacity building 2 1 Developing a CSR Strategy Identifying the Implementing Agencies (conducting due diligence, if required) Identifying the Implementing Agencies (conducting due diligence, if required) 3 3 Project Development – Detailed Project Report (DPR) 4 Clear identification of CSR Budget Project approval – insertion of the approved projects in the policy 5 6 Finalizing agreement with the implementing agency 7 Project Implementation Evaluation (Concurrent, Final & preferably Third Party) 8 Documentation, Monitoring (at Board and Sub-board level) 9 10 Preparation of reporting format and placement in public domain Project impact assessment

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