CSR Advisory

Corporate Social Responsibility (CSR), a term widely used for defining the responsibilities of corporate world towards the society & environment. Although the term is not new in this corporate world, its scope & meaning has undergone major changes from treating it as a mere charity in comparison with the responsibilities/duties of the Corporate towards the outer world. Undertaking CSR initiatives and being socially responsible can have a host of benefits for companies such as the following :

  • Strengthening relationships with stakeholders
  • Enabling continuous improvement and encouraging innovation
  • Attracting the best industry talent as a socially responsible company
  • Additional motivation to employees
  • Risk mitigation because of an effective corporate governance framework
  • Enhanced ability to manage stakeholder expectations

Eligibility Criteria

In India, the concept of CSR is governed by Section 135 of the Companies Act, 2013. The CSR provisions within the Act are applicable to Companies Company (includes foreign company with branches or project in India) having :
  • Net worth of rupees 500 Crore or more
  • Turnover up to 1000 Crore or more
  • Net profit of at least 5crore or more, during any financial year

Threshold Limit

The Board report shall state the details of CSR spending including activity-wise, reasons for spending under 2% of the average net profits of the previous three years and a responsibility statement that the CSR policy, implementation and monitoring process is in compliance with the CSR objectives, in letter and in spirit.

The company can implement its CSR activities through the following methods

  • Directly on its own
  • Through its own non-profit foundation set- up so as to facilitate this initiative
  • Through independently registered non-profit organizations that have a record of at least three years in similar such related activities
  • Collaborating or pooling their resources with other companies

The Board of a Company shall decide to undertake CSR activities approved by CSR Committee through registered trust, registered society or a Company established by a Company or its holding or subsidiary or Associate Company under Section 8 of the Act or otherwise. Provided that :
  • If such trust, society or Company is not established by the Company or its holding, subsidiary or associate company, it shall have a track record of three years in undertaking similar programs or projects;
  • If 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.

Composition of CSR Committee

The new rules, which are applicable from the fiscal year 2014-15 onwards, also require companies to set-up a CSR committee consisting of their board members, as follows :
  • The Committee shall consist of minimum 3 (three) including 1 (one) Independent Director, however in case of Private Company or the Company, which is not required to appoint Independent Director on board, or Foreign Company the committee can be formulated with (2) two directors.
  • The CSR Policy shall be formulated in accordance with Schedule VII and the CSRCommittee will be responsible for framing the policy, finalizing the amount to be spenton CSR, monitoring & implementation of the Scheme.
  • If Company ceases to fulfill the eligibility criteria for three consecutive years, then thecompany is not required to comply until the company will meet the eligibility criteriaonce again.
  • The CSR committee will also be required to ensure that all the income accrued to the company by way of CSR activities is credited back to the CSR corpus.

The CSR Rules provides the manner in which CSR committee shall formulate, monitor thepolicy and manner of understanding for CSR activities.

Compliances

The above CSR activities shall be undertaken by the Company, as per its stated CSR policy, in consonance with the new or ongoing projects excluding activities undertaken in pursuance of its normal course of business. Annual Compliances :
  • The Annual Report of the Company shall include a comprehensive Report on CSR in the format as prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014, containing particulars on Overview of CSR Policy, Composition of the Committee, Avg. Net Profit, prescribed expenditure and details of its spending, reason in case of failure etc.
  • The disclosure on CSR in Board Report should also be available on the Company’s Website.
  • The activities included in the CSR Policy and the prescribed expenditure being undertaken/ spent shall be ensured by the Board, in the respective manner.CSR stands to support the Company’s Vision as well as directions to what Organization stands for and will sustain its clients. An ISO 26000 is the accepted worldwide standard for Corporate Social Responsibility (CSR).

Eligible Activities

The Act lists out a set of activities eligible under CSR. Companies may implement these activities taking into account the local conditions after seeking board approval. The indicative activities which can be undertaken by a company under CSR have been specified hereunder :
  • Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water;
  • Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects;
  • Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;
  • Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water;
  • 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 sports;
  • Contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women;
  • Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government;
  • Rural development projects.

The below activities doesn’t include under the CSR activities of the Company

  • Business run in the normal course.
  • Outside the territory of the India or abroad.
  • For the welfare of the employees and their families.
  • Political party contribution of any amount directly and indirectly as defined u/s 182 of the Act.

Services Offered :

  • Consultancy on Applicability of CSR Regulations
  • Advisory on formation of CSR Policy
  • Advisory on formation and setting roles and responsibilities of CSR committee
  • Advisory on list of activities that needs to be undertaken on CSR programme for a corporate
  • Consultancy on documentations to be maintained while conducting CSR policy
  • Performing Due Diligence for the organizations and Projects that are to be carried out under CSR policy
  • Formation of a Trust or section 8 company or any other mode of organization (NPO) for performing CSR Activities
  • Application u/s12A of Income tax Act for getting exemption on NPO formed for conducting CSR Activities
  • Application for grant of approval u/s80G of Income Tax Act for the NPO
  • Advising on Accounting and Tax Aspects
  • Auditing of Books of Accounts