A Note
Section 135 – Corporate Social Responsibility
Eligibility:
Every Company having:
- Net Worth - Rs. 500 Crores or more; or
- Turnover - Rs. 1000 Crores of more; or
- Net Profit - Rs. 5 Crores of more
Any Company which ceases to fall under the criteria of 135(1) for consecutive three years shall not be required to;
- Constitute CSR Committee
- Does not require to comply with the provision from 135(2) to 135(5)
Till the time they meet the criteria.
Discloser in Board’s Report: (135(2))
Under section 134(3) the Company shall mention the composition of CSR Committee in Boards Report.
As per Rule 9 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company's website, if any, as per the particulars specified in the Annexure of said Rules.
Constitution of the Committee: {135(3)}
Consisting of 3 or more directors. Out which one shall be independent director.
However as per rule 5 of the CSR Rules for Private Companies:
1. Appointment of Independent Directors is not required
2. Can have only two Directors as the Committee members
3. In case of a foreign Company either one of the two members of the Committee shall be the person under 380(1) of the Act.
(In case of foreign Company the balance sheet filled under sun-clause 381(1) shall have an annexure regarding CSR report)
The Committee shall;
- Make the policy and recommend to the board indicating activities as per Schedule VII
- Recommend the amount of expenditure
- Monitor the CSR Policy of the Company
The Board shall: {135(4)&(5))
1. Consider the recommendations by CSR Committee, approve the policy, disclose the contents of the policy in its report and place the policy on website.
2. Ensuring the activities are done by company only.
The Company shall spend at least 2% of average net profit of preceding three years. In spending the preference can be given to local area first.
Also if any amount is not spent, an explanation is to be given in the board’s report
CSR Policy;
The CSR policy shall contain the following:
1. List of Programs falling under Schedule VII of the Act.
2. eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water:
3. promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects;
4. 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 backward groups;
5. 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;
6. 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:
7. measures for the benefit of armed forces veterans, war widows and their dependents;
8. training to promote rural sports, nationally recognized sports, Paralympic sports and Olympic sports;
9. contribution to the P me Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Caste$, the Scheduled Tribes, other backward classes, minorities and women;
10. contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government
11. rural development projects
Any surplus arising out of CSR Activity shall not form a part of business profit.
CSR Activity:
a. CSR Activities shall be undertaken by the Company except the things done in ordinary course of the business
b. CSR Activity can be done through a registered Society or trust as well. However if the trust or society has not been established by the company then the trust or society shall have a track record of 3 years.
c. The company has specified the activities, projects and programs to be conducted by these entities along with the reporting and monitoring mechanism.
d. A company may do the CSR activity in collaboration with other companies as well but it should be able to show its part of expenses separately.
e. Activities done in India only shall be considered
f. CSR Activities for the benefit of employee shall not be considered
g. The Companies can do CSR expenditure for its personnel and it’s supporting entities but not more than 5% of the total CSR amount for the year.
h. Contribution to Political Party shall not be considered for this purpose.
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