COMPANY ( CORPORATE SOCIAL RESPONSIBILITY POLICY ) RULES 2014

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Information about COMPANY ( CORPORATE SOCIAL RESPONSIBILITY POLICY ) RULES 2014
Business & Mgmt

Published on March 3, 2014

Author: ananndkankni

Source: slideshare.net

Description

Sec 135 AND Schedule VII OF COMPANIES ACT 2013 got notified on 27th Feb. 2014 which will be applicable from 1st April, 2014.

CORPORATE SOCIAL RESPONSIBILITY For Corporate India w.e.f. 1ST April, 2014

MINISTRY OF CORPORATE AFFAIRS, NOTIFIED Sec. 135 & SCHEDULE VII OF THE COMPANIES ACT, 2013 • Sec. 135 of the Companies Act, 2013 • Applicability : Every Company in India, if one of the following condition is met–  Net Worth of ₹ 500 Crore or more  Turnover of ₹ 1,000 Crore or more  Net Profit of ₹ 5 Crore or more at any time during the financial year.

Sec. 135 OF THE COMPANIES ACT, 2013 shall constitute a • Companies falling under this section CORPORATE SOCIAL RESPONSIBILITY COMMITTEE. • The committee shall consist of 3 or more directors, out of which at least 1 shall be independent. • CSR committee would be responsible to formulate CSR Policy, recommend the CSR activities as specified in Schedule VII & monitor the CSR expenditure. • Board would be mandatorily required to disclose its CSR Policy in its report and on the company’s website.

QUANTUM OF PROFIT TO BE SPENT ON C.S.R. ACTIVITIES • The CSR contribution would be at least 2% of the average net profit made during the immediately preceding financial years. • NET PROFIT = Net profit as per the financial statements of the company as per section 198. BUT Excludes: 1. Profits generated outside India through overseas branches & subsidiaries. 2. Any dividend received from other companies in India that are complying the CSR provision u/s 135

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014 • Once a company is covered under the CSR provisions as per sub section (1) of Section 135, the company will have to comply with the rules for 3 consecutive financial year, even if in the subsequent years these provisions do not apply to them. • CSR activities must be undertaken in India only. • Group companies or associates or even two or more independent companies can collectively set up a registered trust /society / separate company to undertake the CSR activities. However reporting on CSR activities would be done separately.

• COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014 Private & Unlisted companies are exempted from the requirement of appointing an Independent Director on the CSR committee. • The expenditure incurred by the companies on CSR activities should not be ones incurred in the normal course of business. Clear distinction must be made between the two. • The surplus arising of any CSR activities is not to be considered as business profits of the company. • The CSR Policies & activities undertaken must be displayed on the website of the company as well as in the Board Report.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014 CSR Rules for FOREIGN COMPANIES • Foreign companies covered under CSR provision, would require to contribute on the profits from the operations in India. The Net Worth / Turnover / Net Profit of a Foreign Company would be computed as per the Financial Statements prepared in accordance with the provisions of clause (a) of sub section (1) of Section 381 and section 198 of Companies Act, 2013.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014 CSR Rules for FOREIGN COMPANIES • Foreign companies covered under CSR provision, would require to contribute on the profits from the operations in India. The Net Worth / Turnover / Net Profit of a Foreign Company would be computed as per the Financial Statements prepared in accordance with the provisions of clause (a) of sub section (1) of Section 381 and section 198 of Companies Act, 2013.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014 • Any contribution to a political party; directly or indirectly. • CSR projects for the Welfare of its own employees & its families. • Any CSR expenditure incurred outside India.

SCHEDULE VII OF THE COMPANIES ACT, 2013 ACTIVITIES WHICH MAY BE INCLUDED • BY through a notification on 27th Feb., 2014 amended the schedule and MCA COMPANIES IN THEIR CSR POLICY widened the scope of CSR activities. • Now the revised Sch. VII is as follows :1. Eradicating hunger, poverty, and malnutrition, promoting preventive health care, sanitation and making available safe drinking water. 2. Promoting education, including special education and employment enhancing vocation skills among children, women, elderly, and differently abled and livelihood enhancement projects. 3. 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 socially, and economically backward groups.

SCHEDULE VII OF THE COMPANIES ACT, 2013 ACTIVITIES WHICH MAY BE INCLUDED BY COMPANIES sustainability, ecological balance, protection of 4. Ensuring environmental IN THEIR CSR POLICY flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water. 5. 6. 7. 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 arts and handicrafts. Measures for the benefit of armed forces veterans, war widows, and their dependents. Training to promote rural sports, nationally recognized sports, paralympic sports and olympic sport.

SCHEDULE VII OF THE COMPANIES ACT, 2013 ACTIVITIES WHICH MAY BE INCLUDED BY COMPANIES IN THEIR CSRor POLICY 8. Contribution to Prime Minister’s National Relief Fund any other fund set up by the Central Government for socio-economic development and relief and welfare of the scheduled castes and the Scheduled tribes and other backward classes, minorities, and women. 9. Contribution or funds provided to technology incubators located within academic institutions which are approved by the Central Government. 10. Rural Development Projects.

FORMAT OF THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE BOARD REPORT. 1. 2. 3. 4. 5. A brief outline of the Company’s CSR policy. Composition of CSR committee. Average net profit of the last three financial years. Prescribed CSR expenditure (2% of the net profit). 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.

STATEMENT SHOWING THE C.S.R. EXPENDITURE

FORMAT OF THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE BOARD 6. In case REPORT. has failed to spend the two percent of the the company 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. 7. A responsibility statement of the CSR Committee that the implementation and monitoring of CSR Policy, is in compliance with the CSR objectives and Policy of the company. 8. The report shall be signed by  CEO / MD / Director of the company  Chairman of CSR committee  Person specified under clause (d) of sub section (1) of Section 380 of the Act. (in case of foreign company)

LINK TO NOTIFICATION • Notification for the applicability of Sec. 135 & Sch. VII of the Companies Act, 2013 http://www.mca.gov.in/Ministry/pdf/CompaniesActNotificati on1_2014.pdf __________________________________________________ • Notification: Companies (Corporate Social Responsibility Policy ) Rules, 2014 http://www.mca.gov.in/Ministry/pdf/CompaniesActNotificati on2_2014.pdf __________________________________________________ • Notification amending Sch. VII of the Companies Act, 2013. http://www.mca.gov.in/Ministry/pdf/CompaniesActNotificati on3_2014.pdf

TAX TREATMENT OF CSR EXPENDITURE Presently there is no circular or notification issued by CBDT regarding the tax treatment for CSR expenditure.

ANANND KANKNI COMPANY SECRETARY +91-9707056733

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