Provisions of the Companies Bill Relating to CSR

Provisions of the Companies Bill
Relating to CSR
1) Every company having a net worth of rupees five
hundred crore or more, or a turnover of rupees one
thousand crore or more, or a net profit of rupees
five crore or more during any financial year shall
constitute a Corporate Social Responsibility
Committee of the Board consisting of three or more
directors, out of which at least one director shall be
an independent director.
2) The Board's report under sub-section (3) of section
134 (o) shall disclose the composition of the
Corporate Social Responsibility Committee.
3) The Corporate Social Responsibility Committee
formulate and recommend to the Board, a
Corporate Social Responsibility Policy which
shall indicate the activities to be undertaken by
the company as specified in Schedule VII;
b. recommend the amount of expenditure to be
incurred on the activities referred to in clause
(a); and
monitor the Corporate Social Responsibility
Policy of the company from time to time.
4) The Board of every company referred to in sub-section
(1) shall,
a) After taking into account the recommendations
made by the Corporate Social Responsibility
Committee, approve the Corporate Social
Responsibility Policy for the company and
disclose the contents of such Policy in its report
and also place it on the company's website, if
any, in such manner as may be prescribed; and
b) ensure that the activities as are included in
Corporate Social Responsibility Policy of the
company are undertaken by the company.
5) The Board of every company referred to in sub-
section (1), shall make every endeavor to ensure
that the company spends, 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;
Provided that if the company fails to spend such
amount, the Board shall, in its report made under
clause (o) of sub-section (3) of section 134, specify
the reasons for not spending the amount.
 Activities which may be included by
companies in their Corporate Social
Responsibility Policies
 Activities relating to:—
 (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 human immunodeficiency virus,
acquired immune deficiency syndrome,
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
socioeconomic development and relief and funds for
the welfare of the Scheduled Castes, the Scheduled
Tribes, other backward classes, minorities and
women; and
 (x) such other matters as may be prescribed
Under Clause (o) of Sub-Section (3)
of Section 134
There shall be attached to statements laid before a
company in a general meeting, a report by its Board
of Directors, which shall include:
(o) The details about the policy developed and
implemented by the company on corporate social
responsibility initiatives taken during the year.
Sub Section (8) of Section 134
If a company contravenes the provisions of this
section, the company shall be punishable with
fine which shall not be less than fifty thousand
rupees but which may extend to twenty-five lakh
rupees and every officer of the company who is
in default shall be punishable with
imprisonment for a term which may extend to
three years or with fine which shall not be less
than fifty thousand rupees but which may extend
to five lakh rupees, or with both.
CSR Commitee
Shall comprise of 3 Directors out of which at
1 Director shall be an independent
Some companies may not be mandatorily
required to have Independent Director under the
provisions of Companies Act. How this criteria
shall be met is given in MCA guidelines.
 Boards Report needs to disclose the
composition of CSR committee.
Functions of CSR Commitee
 Formulate and recommend to the Board the a CSR
policy which shall undertake such activities, as
specified under Schedule VII.
 Recommend the amount of expenditure to be
incurred on such activities.
 Boards Report needs to disclose the composition of
CSR committee.
 Monitor the CSR policy of the company from time to
 Prepare a transparent monitoring mechanism for
ensuring implementation of projects /activities
Contents of CSR Policy
 Projects and Programs that are to be undertaken by
the company in pursuit of CSR .
 List of CSR projects which company plans to
undertake during the implementation year
specifying modalities of execution.
 Statement that surplus arising out of the CSR
activity shall not be part of the business profits of
the company.
 A Statement that Corpus shall include
(a) 2% of average Net Profits
(b) any income arising therefrom
(c) surplus arising out CSR activities.
Boards Responsibility
 To ensure that 2% of average Net Profit of the last
preceding 3 years is spent on CSR activities every year.
 Net profit shall be before tax and shall not include the
profit arising from branches outside India.
 To approve CSR policy after recommendations of CSR
 To disclose CSR policy and initiatives in Boards report
and company website.
 To ensure that activities reflected in CSR policy are
actually undertaken by company.
 If company does not spend the earmarked 2 % of net
profits as required, then Board to report reasons in
Board Report.
Other Points
(1) Tax Treatment of CSR will be in accordance of
IT Act as may be notified by CBDT.
(2) A Company may set up a Trust, Foundation or
Society or any other form of entity operating
within India to facilitate implementation of its
CSR activities in accordance with its stated CSR
(3) Company may collaborate or pool resources
with other company to undertake CSR activities
and any such expenditure incurred on
collaborative efforts shall qualify for CSR
Other Points
(4) Only such CSR activities shall be taken into
consideration as are undertaken within India..
(5) Only such CSR activities, which are not
exclusively for the benefit of the employees of the
company or their family members shall be taken
into consideration as CSR activity.
(6) Company shall give preference to local area and
areas around it , where it operates, for spending the
amount earmarked for CSR activities.
 (7) Format of Annual Report on CSR initiatives to
be included in the Board Report by Qualifying
MCA on CSR Activities
(1) The CSR activities shall be undertaken by the
company, as per its stated CSR Policy, as projects or
programs or activities (either new or ongoing),
excluding activities undertaken in pursuance of its
normal course of business.
(2) The Board of a company may decide to undertake
its CSR activities approved by the CSR committee,
through a registered trust or a registered society or a
company established by the company or its holding
or subsidiary or associate company under section 8
of the Act or otherwise:
MCA on CSR Activities
Provided that(i) if such trust, society or company is not established
by the company or its holding or subsidiary or
associate company, it shall have an established track
record of three years in undertaking similar programs
or projects;
(ii) the company has specified the project or programs
to be undertaken through these entities, the modalities
of utilization of funds on such projects and programs
and the monitoring and reporting mechanism.
MCA on CSR Activities
(3) A company may also collaborate with other companies
for undertaking projects or programs or CSR activities, in
such a manner that the CSR committees of respective
companies are in a position to report separately on such
projects or programs in accordance with these rules
(4) Subject to provisions of sub-section (5) of section l15
of the Act the CSR projects or programs or activities
undertaken in India only (shall amount to CSR
(5)The CSR projects or programs or activities that benefit
only the employees of the company and their families
shall not be considered as CSR activities in accordance
with section 135 of the Act'
MCA on CSR Activities
(6) Companies may build CSR capacities of their own
personnel as well as those of their Implementing
agencies through Institutions with established track
records of at least three financial years but such
expenditure shall not exceed five percent. of total CSR
expenditure of the company in one financial year.
(7) Contribution of any amount directly or indirectly to
any political party under section 182 of the Act,
shall not be considered as CSR activity
MCA on CSR Committee
CSR Committees:
(1) The companies mentioned in the rule 3 shall
constitute CSR Committee as under:
(i) an unlisted public company or a private company
covered under sub-section ( I ) of section 135 which
is not required to appoint an independent director
pursuant to sub-section (4) of section 149 of the
Act, shall have its CSR Committee without such
director .
(ii) a private company having only two directors on its
Board shall constitute its CSR Committee with two such
MCA on CSR Committee
(iii) with respect to a foreign company covered under
these rules, the CSR Committee shall comprise of at
least two persons of which one person shall be as
specified under clause (d) of sub-section (1) of section
380 of the Act and another person shall be nominated
by the foreign company.
(2) The CSR Committee shall institute a transparent
monitoring mechanism for implementation of the CSR
projects or programs or activities undertaken by the
MCA on CSR Policy
The CSR Policy of the company shall, inter-alia, include
the following, namely (a) 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 project or programs and
implementation schedules for the same; and
(b) monitoring process of such projects or Programs:
Provided that the CSR activities does not include the
activities undertaken in pursuance of normal course of
business of a company.
MCA on CSR Policy
(1) Provided further that the Board of Directors shall
ensure that activities included by a company in its
Corporate Social Responsibility Policy are related to the
activities included in Schedule VII of the Act.
(2) The CSR Policy of the company shall specify that the
surplus arising out of the CSR projects or programs
or activities shall not form part of the business profit of
a company.
MCA on CSR Reporting
(1) The Board's Report of a company covered under
these rules pertaining to a financial year commencing
on or after the 1st day of April, 2014 shall include an
annual report on CSR containing particulars specified
in Annexure.
(2) In case of a foreign company, the balance sheet filed
under sub-clause (b) of sub-section (l) of section 381
shall contain an Annexure regarding report on CSR.
MCA Format for Annual Report
1.A brief outline of the company's CSR policy,
including overview of projects or programs proposed
to be undertaken and a reference to the web-link to
the CSR policy and projects or programs.
2. The Composition of the CSR Committee.
3. Average net profit of the company for last three
financial years
4. Prescribed CSR Expenditure (two per cent. of the
amount as in item 3 above)
MCA Format for Annual Report
5. Details of CSR spent during the financial year.
(a) Total amount to be spent for the financial year;
(b) Amount unspent , if any;
(c) Manner in which the amount spent during the
financial year is detailed below:
(i) Project/ Activity identified
(ii) Sector in which project covered
(iii) Local Area or other. Specify State and District
where project undertaken.
(iv) Amount Outlay (Budget)
(v) Amount Spent : 1.Direct Expenditure 2. Overheads
MCA Format for Annual Report
(vi) Cumulative Expenditure up to Reporting Period.
(vii) Amount Spent : 1. Direct 2. Through Implementing
6. In case the company has failed to spend the two
per cent of the average net profit of the last three
financial years or any part thereof, the company
shall provide the reasons for not spending the
amount in its Board report.
MCA Format for Annual Report
7. A responsibility statement of the CSR Committee
that the implementation and monitoring of CSR
Policy, is in compliance with CSR objectives and
Policy of the company.
(Chief Executive Officer or Managing Director or
sd/Person specified under clause (d) of sub-section (l) of
section 380 of the Act.
sd/(Chairman CSR Committee)
The GRI was established in 1997 in partnership
with the United Nations’ Environment Program
GRI is a Non Profit Organization that works towards
a Global sustainable economy by providing
sustainability reporting guidance.
Sustainable Reporting refers to the practice of
measuring, disclosing and being accountable to
internal and external stakeholders
organizational performance towards the goal of
sustainable development.
These reports are intended to improve internal
processes, engage stakeholders and influence
GRI promotes the use of sustainability reporting as
a way for organizations to become more
sustainable and contribute to sustainable
The Global Reporting Initiative released its G3
guidelines in 2006. A minor update (version G3.1)
was issued in 2011. On May 22, 2013, the Global
Reporting Initiative launched a new major update of
its guidelines: version GRI G4. During a transition
period of two years, companies will still be able to
use version G3 for their GRI reporting.
For the reporting year 2012, there are two changes:
» on the one hand, on February 29, 2012, GRI
published the "Oil & Gas sector supplement" (OGSS),
which includes 14 specific indicators for the Oil & Gas
industry and additional requirements for a number of
other indicators. It is now mandatory to use OGSS.
» on the other hand, because of the French law
Grenelle II (section 225), which makes it compulsory
for companies to include social, environmental and
societal information in their annual report and to
have this information verified by an independent
third party, it was Total’s 2012 Registration document
that was checked (whereas in 2011, it was Total's CSR
The Global Reporting Initiative's (GRI) vision is that
reporting on economic, environmental, and social
performance by all organizations becomes as routine
and comparable as financial reporting. GRI
accomplishes this vision by developing, continually
improving, and building capacity around the use of its
Sustainability Reporting Framework.
An international network of thousands from business,
civil society, labor, and professional institutions create
the content of the Reporting Framework in a
consensus-seeking process.
GRI Report Content
Strategy and Analysis
Organisation Profile
Report Parameters
Corporate Governance
Commitments and Engagement
Management Approaches
GRI Report Content
Economic Performance
Environmental Performance
Human Rights Performance
Labour Practices & Decent Work Performance
Society Performance
Product Responsibility Performance

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