Company Law CIA III CSR

COMPANY LAW II
CIA – 3
CORPORTATE SOCIAL RESPONSIBILITY
SUBMITTED TO:
Mr. BHUVANESHWAR RAI
FACULTY, SCHOOL OF LAW
CHRIST UNIVERSITY
SUBMITTED BY:
Mr. VEDANT GOSWAMI
6 BALLB B
REGISTER NO: 1750236
SCHOOL OF LAW, CHRIST UNIVERSITY
Introduction:
Corporate Social Responsibility (CSR) can be defined as a Company’s sense of

responsibility towards the community and environment (both ecological and social) in which
it operates. Companies can fulfil this responsibility through waste and pollution reduction
processes, by contributing educational and social programs, by being environmentally
friendly and by undertaking activities of similar nature. CSR is not charity or mere donations.
CSR is a way of conducting business, by which corporate entities visibly contribute to the
social good. Socially responsible companies do not limit themselves to using resources to
engage in activities that increase only their profits. They use CSR to integrate economic,
environmental and social objectives with the company’s operations and growth. CSR is said
to increase reputation of a company’s brand among its customers and society.
The Companies Act, 2013 has formulated Section 135, Companies (Corporate Social
Responsibility) Rules, 2014 and Schedule VII which prescribes mandatory provisions for
Companies to fulfil their CSR. This article aims to analyse these provisions (including all the
amendments therein).
Corporate Social Responsibility is not a new concept in India, however, the Ministry of
Corporate Affairs, Government of India has recently notified the Section 135 of the
Companies Act, 2013 along with Companies (Corporate Social Responsibility Policy) Rules,
2014 "hereinafter CSR Rules" and other notifications related thereto which makes it
mandatory (with effect from 1st April, 2014) for certain companies who fulfil the criteria as
mentioned under Sub Section 1 of Section 135 to comply with the provisions relevant to
Corporate Social Responsibility. As mentioned by United Nations Industrial Development
Organization (UNIDO), CSR is generally understood as being the way through which a
company achieves a balance of economic, environmental and social imperatives ("Triple
Bottom-Line- Approach"), while at the same time addressing the expectations of shareholders
and stakeholders.
Applicability of CSR Provisions:
On every Company including its holding or subsidiary having:
 Net worth of Rs. 500 Crore or more, or

 Turnover of Rs. 1000 crore or more, or
 Net Profit of Rs. 5 crore or more.
A foreign company having its branch office or project office in India, which fulfils the
criteria specified above
However, if a company ceases to meet the above criteria for 3 consecutive financial years
then it is not required to comply with CSR Provisions till such time it meets the specified
criteria.
CSR Committee:
Every Company on which CSR is applicable is required to constitute a CSR Committee of

the Board:
 Consisting of 3 or more directors, out of which at least one director shall be an

independent director. However, if a company is not required to appoint an
independent director, then it shall have in 2 or more directors in the Committee.
 Consisting of 2 directors in case of a private company having only two directors on its
Board
 Consisting of at least 2 persons in case of a foreign Company of which one person

shall be its authorised person resident in India and another nominated by the foreign
company
Functions of CSR Committee:
The CSR Committee shall—
 Formulate and recommend to the Board, a CSR Policy which shall indicate the
activities to be undertaken by the Company
 Recommend the amount of expenditure to be incurred on the activities referred to in

clause (i)
 Monitor the CSR Policy of the company from time to time
 Institute a transparent monitoring mechanism for implementation of the CSR projects

or programs or activities undertaken by the company.
Responsibility of Board of Directors (BoD):
The BoD of every company on which CSR is applicable shall:
 After considering the recommendations made by the CSR Committee, approve the
CSR Policy for the Company and disclose contents of such Policy in Board report.
 ensure that the activities as are included in CSR Policy of the company are undertaken
by the Company
 shall disclose the composition of the CSR Committee in Board Report
 Ensure that the company spends, in every financial year, at least 2% of the average
net profits of the company made during the 3 immediately preceding financial years,
in pursuance of its CSR Policy. The CSR projects/programs/activities undertaken in
India only shall amount to CSR Expenditure.
Note: The Company shall give preference to the local area and areas around it where it
operates, for spending the amount earmarked for CSR activities and shall specify the reasons
for not spending whole of earmarked amount (if it fails to spend some) in Board Report.
CSR Policy
The CSR Policy of the company shall, inter-alia, include the following namely:-
 A list of CSR projects or programs which a company plans to undertake specifying

modalities of execution of such project or programs and implementation schedules for
the same
 Monitoring process of such projects or programs
 A clause specifying that the surplus arising out of the CSR projects or programs or
activities shall not form part of the business profit of the company.
CSR Activities
 The CSR activities shall be undertaken by the company, as per its CSR Policy,
excluding activities undertaken in pursuance of its normal course of business.
 The BoD may decide to undertake its CSR activities approved by the CSR
Committee, through
 a section 8 company or a registered trust or a registered society, established by the

company, either singly or alongwith any other company, or
 a section 8 company or a registered trust or a registered society, established by the

Central Government or State Government or any entity established under an Act of
Parliament or a State legislature
 a section 8 company or a registered trust or a registered society, other than those

specified in clauses (a) and (b) above, having an established track record of 3 years in
undertaking similar programs or projects;
 collaboration with other companies,
 The CSR projects or programs or activities not to be considered as CSR Activities:
 Expenses for the benefit of only the employees of the company and their families
 Contribution of any amount directly or indirectly to any political party

Display of CSR Activities on its Website
The BoD shall disclose contents of CSR policy in its report and the same shall be displayed
on the company’s website, if any.
Other Important Points:
 The balance sheet of a foreign company to be filed under section 381(1)(b) of the Act
shall contain an Annexure regarding report on CSR.
 The Board of Directors shall ensure that activities included by a company in its CSR
Policy are related to the areas or subjects specified in Schedule VII (given below) of
the Act.
Schedule 7
Activities which may be included by companies in their Corporate Social Responsibility

Policies relating to:
 Eradicating hunger, poverty and malnutrition, promoting health care including

preventive health care and sanitation including contribution to the Swach Bharat Kosh
set-up by the Central Government for the promotion of sanitation and making
available safe drinking water.
 Promoting education, including special education and employment enhancing

vocation skills especially among children, women, elderly and the differently abled
and livelihood enhancement projects.
 Promoting gender equality, empowering women, setting up homes and hostels for
women and orphans; setting up old age homes, day care centres and such other
facilities for senior citizens and measures for reducing inequalities faced by socially
and economically backward groups.
 Ensuring environmental sustainability, ecological balance, protection of flora and

fauna, animal welfare, agroforestry, conservation of natural resources and maintaining
quality of soil, air and waterincluding contribution to the Clean Ganga Fund set-up by
the Central Government for rejuvenation of river Ganga.
 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 art and handicrafts;
 Measures for the benefit of armed forces veterans, war widows and their dependents;
 Training to promote rural sports, nationally recognised sports, Paralympic sports and
olympic sports
 Contribution to the Prime Minister’s national relief fund or any other fund set up by
the central govt. for socio economic development and relief and welfare of the
schedule caste, tribes, other backward classes, minorities and women;
 Contributions or funds provided to technology incubators located within academic

institutions which are approved by the central govt.
 Rural development projects
 Slum area development.
CONCLUSION
CSR in India was legislated with the hope that it would bring about a change in the attitude of
corporate institutions, who would give back to the society in a big way as it was the society
whose needs helped them prosper in the first place. Similarly, it was also felt that the society
would also get help as the government has been found to be wanting in its efforts to help
local populace in several instances. The CSR act, in spite of all its good intentions, has failed
to cover a lot of ground. It has given an impetus to companies to give back to the society,
however, due to some policy and procedural inadequacies, it has failed to set up a fool-proof
method of imparting CSR. Faulty criterions to determine the extent of money spent, fudging
of data, selective and self-serving CSR tasks or short-term money spending are some of the
core problems that India’s CSR laws and policy suffer from. Therefore, the need of the hour
is to change the CSR laws and amend it to become long-term, simple and easier to monitor.
CSR laws, with some tweaks, will greatly help the society in the near future.

Company Law CIA III CSR

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COMPANY LAW II

CORPORTATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) can be defined as a Company’s sense of

Applicability of CSR Provisions:

On every Company including its holding or subsidiary having:

 Net worth of Rs. 500 Crore or more, or

Every Company on which CSR is applicable is required to constitute a CSR Committee of

 Consisting of 3 or more directors, out of which at least one director shall be an

 Consisting of at least 2 persons in case of a foreign Company of which one person

Functions of CSR Committee:

The CSR Committee shall—

 Recommend the amount of expenditure to be incurred on the activities referred to in

 Monitor the CSR Policy of the company from time to time

 Institute a transparent monitoring mechanism for implementation of the CSR projects

Responsibility of Board of Directors (BoD):

The BoD of every company on which CSR is applicable shall:

 shall disclose the composition of the CSR Committee in Board Report

 A list of CSR projects or programs which a company plans to undertake specifying

 Monitoring process of such projects or programs

 a section 8 company or a registered trust or a registered society, established by the

 a section 8 company or a registered trust or a registered society, established by the

 a section 8 company or a registered trust or a registered society, other than those

 collaboration with other companies,

 The CSR projects or programs or activities not to be considered as CSR Activities:

 Contribution of any amount directly or indirectly to any political party

Other Important Points:

Activities which may be included by companies in their Corporate Social Responsibility

 Eradicating hunger, poverty and malnutrition, promoting health care including

 Promoting education, including special education and employment enhancing

 Ensuring environmental sustainability, ecological balance, protection of flora and

 Contributions or funds provided to technology incubators located within academic

 Rural development projects

 Slum area development.

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