Home       Top Rated       Submit Article     Advanced Search     FAQ       Contact Us       Lawyers in India       Law Forum     RSS Feeds     

Register your Copyright Online

We offer copyright registration right from your desktop click here for details.

Latest Articles | Articles 2014 | Articles 2013 | Articles 2012 | Articles 2011 | Articles 2010 | Articles 2009 | Articles 2008 | Articles 2007 | Articles 2006 | Articles 2000-05

Search On:Laws in IndiaLawyers Search

Mutual Consent Divorce in Delhi
We provide fast, cost effective and Hassle free solution.
Contact us at Ph no: 9650499965 (Divorce Law Firm Delhi)

E-mail login                       Password
     

Free Email Sign Up

Main Categories
 Accident Law
 Arbitration
 Aviation Law
 Banking and Finance laws
 Case Laws
 Civil Laws
 Company Law
 Constitutional Law
 Consumer laws
 Contracts laws
 Criminal law
 Drug laws
 Dubai laws
 Educational laws
 Employment / Labour laws
 Environmental Law
 family law
 Gay laws and Third Gender
 Human Rights laws
 Immigration laws
 Insurance / Accident Claim
 Intellectual Property
 International Law
 Juvenile Laws
 Law - lawyers & legal Profession
 Legal Aid and Lok Adalat
 Legal outsourcing
 Media laws
 Medico legal
 Miscellaneous
 Real estate laws
 Right To Information
 Tax Laws
 Torts Law
 Woman Issues
 Workplace Equality & Non-Discrimination
 Yet Another Category

More Options
 Most read articles
 Most rated articles

Subscription
Subscribe now and receive free articles and updates instantly.

Name
Email



Copyright Registration

To Copyright Your Books, Videos, Songs, Scripts etc
Call us at: 9891244487 / or email at: admin@legalserviceindia.com
Top Law Colleges

Law Updates:

# Income-Tax
# Family law
# Company Law
# Constitutional Law
# Partnership firms
# Immigration Law
# Cyber Law
# Lok Adalat, legal Aid & PIL
# Forms
# Trademarks
# Woman issues
# Medico Legal
# Consumer laws
# Criminal laws
# Supreme Court Judgments


Published : September 09, 2014 | Author : arunimaj
Category : Company Law | Total Views : 12017 | Rating :

  
arunimaj

 

The Companies Act, 2013 (“Act”) has introduced several provisions which would change the way Indian corporate do business and one such provision is introducing Corporate Social responsibility (“CSR”) activities.

Section 135(5) of the Act, the first of its kind, requires both public and private companies in India which have (1) net worth of Rs. 500 crore or more; or (2) turnover of Rs. 1000 crore or more; or (3) net profit of Rs. 5 crore or more; in any of the previous 3 financial years to contribute to CSR initiatives. The board of the company should ensure that the company contributes 2% of its average net profit during the 3 preceding financial years to CSR activities. “Average net profit” shall be calculated in accordance with the provisions of section 198 of the 2013 Act which states for calculation of profits of a company in any financial year. Proviso to the Rule 3(1) of the CSR Rules provide that the net worth, turnover or net profit of a foreign company of the Act shall be computed in accordance with balance sheet and profit and loss account of such company prepared in accordance with the provisions of clause (a) of sub-section (1) of section 381 and section 198 of the Companies Act, 2013. MCA through its circular no. 21 dated 18th June, 2014, has clarified that companies that have met the financial thresholds specified in section 135 of the Act in any of the three financial years prior to FY2014-15 will be liable to comply. The circular mentions that companies developing programs as part of their CSR efforts can interpret Schedule VII of the Companies Act 2013 liberally.

A CSR committee is to be constituted comprising at least 3 directors including one independent director. The CSR committee has to formulate and recommend to the board of directors, a CSR Policy. No time frame has been prescribed for constitution of the CSR committee pursuant to section 135 read with Schedule VII of the Act. The committee constituted should be disclosed in the board’s annual report under section 134(3). Rule 3 of Rules clarifies the constitution of the CSR committees by companies unable to fulfill the requirements of section 135(1) on the number of directors. It is clarified that an unlisted public company or a private company may constitute a committee without an independent director pursuant to sub-section (4) of section 149 of the Act. A private company having only two directors on its Board shall constitute its CSR Committee with these two directors. In a foreign company the CSR Committee shall comprise of at least two persons of which one person shall be a resident person authorized to accept service or notice on behalf of the foreign company in India (section 380(1) (d) of the Act) and another person shall be nominated by the foreign company.

Approved CSR Activities in schedule VII to the 2013 Act are eradicating hunger and poverty, education, environment protection, etc. CSR spends can be by contribution to corpus or projects or programs approved by the board on the recommendation of the CSR committee. One time events such as marathons, awards, charitable contributions and advertisements or sponsorships of TV programs do not qualify. Contributions in India alone qualify. Spending solely on employees of the company is not considered a CSR spend. However salaries to regular CSR staff and volunteers based on time spent can be factored into CSR project cost. Expenses under labour legislation do not qualify. CSR activities can be undertaken by contributing to a registered trust, society or under section 8 nonprofit companies. These bodies should have a three year track record in similar programs or projects. Preference to be given to the local area and areas around the company operates for CSR spending.

Excludes activities undertaken in ordinary course of business.

The circular mentions that companies developing programs as part of their CSR efforts can interpret Schedule VII of the Companies Act 2013 liberally; while some activities being undertaken or currently being planned may not exactly match with the wording of Schedule VII, these could be taken up if they capture the essence of the subjects mentioned. MCA has explicitly mentioned that Programs around road safety, creating consumer awareness, support to technology incubators not located within academic institutions (provided they are approved by the Department of Science & Technology) can be considered as CSR programs.

The CSR Policy subject to rule 6 of CSR Rules should state the activities to be undertaken by the company as specified in Schedule VII, recommend the amount of expenditure to be incurred on the activities and monitor the Corporate Social Responsibility Policy of the company from time to time. Subject to the provisions of rule 5(2) of the CSR Rules, the CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company. Every Indian company and foreign company having a branch office or project office in India and satisfying the aforesaid thresholds are required to comply with the CSR requirements. Both holding and subsidiary companies have to fulfill section 135 meeting the thresholds.

The Companies (Corporate Social Responsibility) Rules, 2014 clarify that every company including its holding or subsidiary, and a foreign company defined under of section 2(42) of the Act having its branch office or project office in India which meets the threshold requirement criteria specified in section 135(1) of the Act shall comply with the provisions of section 135 of the Act and these rules.

However, every company which ceases to be a company covered under of section 135(1) of the Act for 3 consecutive financial years is not required to constitute a CSR Committee and to comply with the provisions contained in section 135(2) to (5) till such time it meets the criteria specified in sub- section 135(1). A foreign holding company’s spend on CSR activities in India can be counted as CSR spending of their Indian subsidiary. The circular however, does not lay down any deadline for creation and posting of CSR policies by companies.

Mandatory reporting of CSR policies developed and implemented as part of the Director’s report is also provided for under Sub-section 3(o) of Section 134 of the Companies Act 2013. If a company is unable to spend the contribution amount in a year it should specify the reasons for not spending that amount in its Board of Director’s annual report. There is no penal provision regarding non-compliance of the said provisions in means of spending or in reporting part. However, there are clear penal consequences if a company fails to even set up the CSR committee or fails to create a policy etc. If a company fails to spend the money, it only has to report this along with reasons. Section 134(8) of the Act provides for such penal provision stating in case the company does not disclose the reasons in the Board‘s report, 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.

The new law does no specify punishment for failure to spend CSR expenditure. However such cases are covered under section 450 read with section 451 which provides for residual provisions for the same. Fine under section 450 may extend to ten thousand rupees, and where the contravention is continuing one, a further fine to one thousand rupees for every day after the first during which contravention continues is imposed.

“Excellence should be a Habit”, but not in the case of offences or defaults in the 2013 Act. “Default should not be a habit” says the new law. As per Section 451 of the 2013, the defaulter is punished either with fine or with imprisonment and where the same offence is committed for the second or subsequent occasions within a period of three years, then, that company and every officer thereof who is in default shall be punishable with twice the amount of fine for such offence in addition to any imprisonment provided for that offence.

Where a company has a website, the CSR policy of the company would need to be disclosed on such website pursuant to rule 9 of the CSR Rules. To conclude, the 2013 Act, provides an excellent framework and a point of departure for corporate social responsibility. But details and nuances have to be worked out. Every company has a huge task on hand. It is as if a sprawling minefield of possibilities has been laid open. The coming times will tell what the companies can make out of it.

The author can be reached at: arunimaj@legalserviceindia.com




1 2 3 4 5
Rate this article!     Poor
Excellent    

Most viewed articles in Company Law category
Globalization & its impact on Indian Economy: Developments and Challenges
Winding Up of a Company
Retrenchment under Industrial Dispute Act, 1947
Dissolution of partnership firm
Articles of Association & Alteration of Articles
ADR Mechanism in India
Demerger under Company Law
Which employees do not fall under the ambit of Industrial Dispute Act, 1947
Directors & Their Liabilities
Corporate Personality
Remuneration of Directors
Prevention of oppression & mismanagement
Appointment, Disqualification And Liabilities Of Directors of A Company: A Legal Perspective
Minority Rights on Oppression and Mismanagement Under Companies Act, 1956 And Companies Bill, 2011
Position of a promoter in establishing a Company
The Employees Deposit-linked Insurance Fund Scheme
Most recent articles in Company Law category
Incorporation of A Private limited Company Under Companies Act 2013
One Person Company
Corporate Criminal Liability: A Jurisprudential and Comparative Approach
Distribution arrangement, whether it creates a permanent establishment
Doctrine of Alter Ego and Attribution
Fast Track Exit
Voluntary winding-up of the Company by Members
Corporate Renaissance
Trade, Commerce and Intercourse
The Corporate as a Criminal
Need For Corporate Social Responsibility
Role of Securities Exchange Board of India
Establishment of Foreign Entity in India
Obligations under GATT and GATS
The Role of Securities and Exchange Board of India in Regulating the Primary Market for Securities
Corporate Social Responsibility

Article Comments

there are no comments...

Post Your Comments
Name

Email

Your comments

Note : Your email address is only visible to admin, other members / users cannot see it.

You can use following FXCodes


BOLD : [b]
Italic : [i]

[b] Legal Services India [/b] is a [i]nice website[/i].
[url= http://www.legalservicesindia.com/article/ ]click here to visit.[/url]

Legal Services India is a nice website.
Click here to visit

 

Note : Currently, user comments are moderated and will be posted only after approval.



Welcome!
Please login or register a new free account.

Random Pick
Sport has become one of the major source of entertainment and simultaneously a big market of business too. Even though respective ways of playing the sports have not changed much in the last fifty years, but surely most of the things around the sports have changed.

Statistics
» Total Articles
1380
» Total Authors
3992
» Total Views
15574116
» Total categories
40

Law Forum


Legal Articles

Lawyers in India- Click on a link below for legal Services

lawyers in Chennai
lawyers in Bangalore
lawyers in Hyderabad
lawyers in Cochin
lawyers in Pondicherry
lawyers in Guwahati
lawyers in Nashik

lawyers in Jaipur
lawyers in New Delhi
lawyers in Dimapur
lawyers in Agra
Noida lawyers
lawyers in Siliguri

For Mutual consent Divorce in Delhi

Ph no: 9650499965
For online Copyright Registration

Ph no: 9891244487
Law Articles

lawyers in Delhi
lawyers in Chandigarh
lawyers in Allahabad
lawyers in Lucknow
lawyers in Jodhpur
Faridabad lawyers

lawyers in Mumbai
lawyers in Pune
lawyers in Nagpur
lawyers in Ahmedabad
lawyers in Surat
Ghaziabad lawyers

lawyers in Kolkata
lawyers in Janjgir
lawyers in Rajkot
lawyers in Indore
lawyers in Ludhiana
Gurgaon lawyers

TOP

India's Most Trusted Online law library
Legal Services India is Copyrighted under the Registrar of Copyright Act ( Govt of India) 2000-2016
 ISBN No: 978-81-928510-1-3