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Provisions of the Companies Bill Relating to CSR

SECTION 135

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Provisions of the Companies Bill Relating to CSR

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  1. SECTION 135 • 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. • The Board's report under sub-section (3) of section 134 (o) shall disclose the composition of the Corporate Social Responsibility Committee. Provisions of the Companies Bill Relating to CSR

  2. The Corporate Social Responsibility Committee shall, • 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; • 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. SECTION 135 {CONTD.}

  3. The Board of every company referred to in sub-section (1) shall, • 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 • ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company. . SECTION 135 {CONTD.}

  4. 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. . SECTION 135 {CONTD.}

  5. 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; SCHEDULE VII

  6. (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 SCHEDULE VII

  7. 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. Under Clause (o) of Sub-Section (3) of Section 134

  8. 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.

  9. CSR Commitee • Shall comprise of 3 Directors out of which at least 1 Director shall be an independent Director. • 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.

  10. 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 time. • Prepare a transparent monitoring mechanism for ensuring implementation of projects /activities proposed.

  11. 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 • 2% of average Net Profits • any income arising therefrom • surplus arising out CSR activities.

  12. 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 committee. • 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.

  13. 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 policy. • (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 spending

  14. 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 companies.

  15. 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:

  16. 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.

  17. 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 expenditure) (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'

  18. 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

  19. MCA on CSR Committee • CSR Committees: (1) The companies mentioned in the rule 3 shall constitute CSR Committee as under: • 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 directors:

  20. 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 company

  21. 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.

  22. 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.

  23. 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.

  24. MCA Format for Annual Report • FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE BOARD'S 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)

  25. 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: • Project/ Activity identified • Sector in which project covered • Local Area or other. Specify State and District where project undertaken. • Amount Outlay (Budget) • Amount Spent : 1.Direct Expenditure 2. Overheads

  26. MCA Format for Annual Report (vi) Cumulative Expenditure up to Reporting Period. (vii) Amount Spent : 1. Direct 2. Through Implementing Agency • 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.

  27. 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. • sd/, (Chief Executive Officer or Managing Director or Director) • sd/- Person specified under clause (d) of sub-section (l) of section 380 of the Act. • sd/- (Chairman CSR Committee)

  28. GLOBAL REPORTING INITIATIVE • The GRI was established in 1997 in partnership with the United Nations’ Environment Program (UNEP). • 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 for organizational performance towards the goal of sustainable development.

  29. GLOBAL REPORTING INITIATIVE • These reports are intended to improve internal processes, engage stakeholders and influence investors. • GRI promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable development.​ • 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.

  30. GLOBAL REPORTING INITIATIVE 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 report), 

  31. GLOBAL REPORTING INITIATIVE 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.

  32. GRI Report Content

  33. GRI Report Content

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