What is CSR?
A business organisation, in addition to generating profit, has social obligations too. Besides addressing the expectations of shareholders and the stake-holders, it has the responsibility to give back to the society in which it operates. Corporate Social Responsibility is the way through which a company achieves a balance of Economic, Environmental and Social imperatives (“Triple Bottom Line Approach) as defined by the United Nations Industrial Development Organisation (UNIDO).
A Corporate may discharge such responsibility by its contributions to the Society in any of the following ways:
- Eradication of hunger, malnutrition or poverty
- Promotion of healthcare and sanitation
- Offering support for education and employment that can enhance vocational skills
- Encouraging gender equality
- Ensuring sustainability
- Protecting heritage
- Working for the benefits of the country’s armed forces
- Fostering and training for sports activities
- Contributing to relief projects
Governing Legislations
CSR activities are governed by Section 135 of the Companies Act, 2013, Companies (Corporate Social Responsibility) Rules, 2014 (duly amended in 2018) and Schedule VII.
Specified Criteria for applicability of CSR provisions:
As per the provisions of above-mentioned legislations, CSR activities are mandatory for the Companies fulfilling any of the following criteria:
- Companies that have a net worth of INR 500 Crores or more
- Companies having an annual turnover of INR 1,000 Crores or more
- Companies having a net profit of INR 5 Crores or more
According to CSR Rules, the CSR provisions are also applicable to every company including its Holding or Subsidiary, and a foreign company having its branch office or project office in India falling under the above criteria during the immediately preceding financial year.
CSR Rules specify that a company which does not satisfy the specified criteria for a consecutive period of three financial years is not required to comply with the CSR obligations, implying that a Company not satisfying any of the specified criteria in a subsequent financial year would still need to undertake CSR activities unless it ceases to satisfy the specified criteria for a continuous period of three years.
Constitution of CSR Committee
Companies responsible for CSR activities must constitute a CSR Committee to formulate and monitor the CSR Policy of the Company. It shall consist of at least 3 directors, including at least one independent director.
Companies not required to have independent directors can have two or more directors in lieu of an independent director in such committee.
Where a private company has only two directors, the CSR Committee can be constituted with these two directors.
In case of CSR Committee of a foreign company, it shall consist of at least two persons wherein one or more persons should be resident in India and the other person nominated by the foreign company.
CSR policy framed by a Company shall include the following:
- A list of CSR Programmes or Projects, which a company plans to undertake falling within the purview of Schedule VII of the Act, specifying the modalities of executing such programmes or projects and their implementation schedules.
- Monitoring process of such programmes or projects.
- Surplus, if any, arising out of CSR activities shall not form part of business profit of the Company.
How much to spend on CSR activities?
A Company should spend in every financial year, at least 2% of the average net profits of the Company made during the 3 immediately preceding financial years, towards CSR activities undertaken as per its CSR Policy. The amount thus spent shall be the CSR expenditure for that year.
Dealing with the amount prescribed but not spent
Where the Company is not undertaking any CSR projects and it has not spent the required amount towards CSR during any financial year, then such unspent amount shall be transferred to one of the Funds specified in Schedule VII within a period of 6 months from the close of financial year, to which the unspent amount relates.
Where the Company has undertaken some projects fulfilling the prescribed conditions and has planned the CSR expenditure on the same, out of which some amount still remains unspent, then such Company is required to open a separate bank account to be called as “Unspent Corporate Social Responsibility Account” within 30 days of closure of the financial year and such amount shall be spent by the Company on the ongoing project, within a period of 3 years from the date of transfer and where at the end of said period of 3 years, some amount remains unspent, then the same shall be transferred to in one of the Funds specified in Schedule VII within 30 days of completion of the said 3 years.
Penal Provisions
In case of non-compliance of CSR provisions, the company shall be punishable with fine which shall not be less than Rs.50 thousands but which may extend to Rs.25 lakhs and every officer of such company who is in default shall be punishable with imprisonment for a term which may extend to 3 years or with fine which shall not be less than Rs.50 thousand but which may extend to Rs.5 lakhs, or with both.
Conclusion
The concept of CSR in a global environment is growing and even it is viewed as one of the differentiator by Companies planning for Collaborations across the world. It builds a positive image about the Company or Brand among the stakeholders. While using the products or availing the services of the Companies indulging in CSR activities, their consumers or clients would also feel proud since they are also indirectly becoming part of CSR activities by making such Companies more profitable thereby enabling the Companies to contribute more to the Society.
Further, under the current COVID-19 Scenario, contribution to the Society by Corporates through CSR activities plays a major role since the Government alone cannot meet out the expenses related to medical treatments and allied services. Hence CSR activities are not just a legal compliance but it serves the nation at times of calamities like flood, war, pandemic, etc.
The Aparajitha Group of Companies operates all its CSR activities through its foundation called The ‘Aparajitha Foundation’
Our dedicated team spread across the country go the extra mile to uplift and contribute to the various pockets in society through numerous educational programmes across the country and also provide for financial aid for medical needs of the less and under-privileged people, give administrative support to the old –age home and orphanages
Our vision is to support students in realizing their full potential and give them exposure to build skill sets that are extremely necessary for the development of the right attitude for a successful future. We are extremely glad to share that we are able to provide Soft skill training to more than 10million students across 66.67K schools across 130 districts of 7 states across India. –
To know more about our CSR activities and compliance services, visit our website.
Ramasubramanian
Aparajitha Corporate Services Private Limited
Disclaimer: “The article represents the opinions of the author and the author is solely responsible for the facts, cases and legal or otherwise reproduced in the article”
