CORPORATE SOCIAL RESPONSIBILITY
CSR is termed as “Triple-Bottom-Line-Approach”, which is meant to help the company
promote its commercial interests along with the responsibilities it holds towards the society at
large.
"Corporate Social Responsibility (CSR)" means and includes but is not limited to:-
(i) Projects or programs relating to activities specified in Schedule VII to the Act, or
(ii) Projects or programs relating to activities undertaken by the board of directors of a company
(Board) in pursuance of recommendations of the CSR Committee of the Board as per declared
CSR policy of the company subject to the condition that such policy will cover subjects
enumerated in Schedule VII of the Act.
IMPORTANCE / NEED
1. CSR enhances the company’s brand value by building a socially strong relationship
with customers.
2. CSR helps companies to stand out from the competition when companies are involved
in any kind of community.
3. Make companies more legitimate and help them in accessing a greater market share.
4. Since companies act ethically, they face less legal hurdles.
5. Bolster the goodwill of companies amongst the general public and help in strengthening
their “brand value”.
6. Help in the stabilization of stock markets in both the short and long run
7. Help in limiting state’s involvement in corporate affairs as companies self-regulate and
act as most ethical.
CSR Policy
CSR Policy elaborates the activities to be undertaken by the Company as named in Schedule VII to the
Act and spend. The activities should not the same which are done by the company in its normal course
of business
1. Contents of CSR Policy should be placed on the company’s website by the Board.
2. The activities mentioned in the policy must be undertaken by the company.
3. The Company can join hands with other companies for undertaking projects or programs or
CSR activities and report separately on such programs or projects.
4. The CSR policy shall monitor the projects or programs.
CSR Provisions Companies Act 2013
In India, the Companies Act, 2013 has introduced the idea of CSR to the forefront. The Ministry of
Corporate Affairs, Government of India 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.
APPLICABILITY:
Section 135 of the Companies Act 2013 provides the threshold limit for applicability of the CSR to a
Company:
(a) net worth of the company to be Rs 500 crore or more; or
(b) turnover of the company to be Rs 1000 crore or more; or
(c) net profit of the company to be Rs 5 crore or more.
Further as per the CSR Rules, the provisions of CSR are not only applicable to Indian companies, but
also applicable to branch and project offices of a foreign company in India.
Once a company is covered under the ambit of the CSR, it shall be required to comply with the
provisions of the CSR. The companies covered under the Sub section 1 of Section 135 shall be required
to do the following activities:
I. As provided under Section 135(1) itself, the companies shall be required to constitute CSR
Committee. The CSR Committee shall be comprised of 3 or more directors, out of which
at least one director shall be an independent director.
II. The Board's report shall disclose the compositions of the CSR Committee.
III. All such companies shall spend, in every financial year, at least two per cent of the average
net profits of the company made during the three immediately preceding financial years,
in pursuance of its Corporate Social Responsibility Policy. It has been clarified that the
average net profits shall be calculated in accordance with the provisions of Section 198 of
the Companies Act, 2013.
CONSTITUTION OF THE CSR COMMITTEE
Every company to which CSR criteria is applicable shall constitute a Corporate Social
Responsibility of the Board (i.e. CSR Committee).
Minimum 3 or more directors must form CSR Committee.
Among those 3 directors, at least 1 director must be an independent director.
An unlisted public company or a private company shall have its CSR Committee without any
independent director if an independent director is not required.
In case of a foreign company, the CSR Committee shall comprise of at least 2 persons of which
one person shall be a person resident in India authorized to accept on behalf of the foreign
company – the services of notices and other documents. Also, the other person shall be
nominated by the foreign company.
CSR ACTIVITIES:
Activities may be included by the company in their CSR Policy as per Schedule VII of the
Companies Act, 2013:
I. Eradicating extreme hunger and poverty;
II. Promotion of education;
III. Promoting gender equality and empowering women;
IV. Reducing child mortality and improving maternal health;
V. Combating HIV, AIDS, malaria and other diseases;
VI. Ensuring environmental sustainability;
VII. Employment enhancing vocational skills;
VIII. Social business projects;
IX. Contribution to the Prime Minister's National Relief Fund or any other fund set up by the
Central Government or the State Governments for socio-economic development and relief
and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward
classes, minorities and women;
FINES AND PENALTIES FOR NON-COMPLIANCE
In case a company fails to comply with the provisions relating to CSR spending, transferring
and utilising the unspent amount, the company will be punishable with a minimum fine of Rs
50,000 which may increase to Rs 25 lakh. Further, every officer of such company who defaults
in the compliance will be liable for a punishment which is imprisonment for a term which may
extend to three years or with a minimum fine of Rs 50,000 which may increase to Rs 5 lakh,
or with both.
ADMINISTRATIVE OVERHEAD
Rule 7 of CSR Rules provides that the administrative overheads shall not exceed five percent.
of total CSR expenditure of the company for the financial year. It implies that any expenditure
on administrative overheads in excess of five percent. of total CSR expenditure for the financial
year will not be allowed as CSR expenditure.
It Includes expenses on :-
i. Salaries, wages, travel expenses or any remuneration realized by the Members of the
Executive Committee or Governing Council of the person;
ii. All expenses towards hiring of personnel for management of the activities of the person
and salaries, wages or any kind of remuneration paid, including cost of travel, to such
personnel.
iii. All expenses related to consumables like electricity and water charges, telephone charges,
postal charges, repairs to premise(s) from where the organization or Association is
functioning, stationery and printing charges, transport.
iv. Cost of accounting for and administering funds
v. Expenses towards running and maintenance of vehicles
vi. Cost of writing and filing reports.
vii. Legal and professional charges; and
viii. Rent of premises, repairs to premises and expenses on other utilities;
ONGOING PROJECT
Ongoing project has been defined under rule 2(1)(i) of the Companies (CSR Policy) Rules,
2014 as:
(i) a multi-year project, stretching over more than one financial year;
(ii) having a timeline not exceeding three years excluding the year of commencement;
(iii) includes such project that was initially not approved as a multi-year project but
whose duration has been Page 14 of 21 extended beyond one year by the Board
based on reasonable justification. The project should have commenced within the
financial year to be termed as ‘ongoing’.
FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE
BOARD’S REPORT
