1. Foriegn Companies and Subsidiaries also need to do CSR activities if they have a branch or project office in Inda.
2. Hunger need not be extreme; Ordinary hunger also is fine....
3. Private Companies and unlisted Public companies are exempt from appointing Independent Director in CSR Committee
4. Private Companies also need to comply with CSR and the can have 2 Directors in its committee (if there are only 2 Directors in its Board)
Please read.............
CSR Section & Rules Notified – What has changed & What remains the same
By : CS. Mohan Kumar Company Secretary, Chennai
1. Sec. 135 of the Companies Act dealing with CSR is notified vide Notification dated 27th Feb, 2014. It will be effective from 1st April 2014.
2. Every Company having networth of 500 crores or Turnover of 1000 crores or Net profit of 5 crores need to constitute a CSR committee. It shall have minimum of 3 Directors and one of them shall be independent Director.
3. Unlisted Public Company or a private Company which needs to comply with CSR provisions shall have CSR committee without the Independent Director
4. A private Company having 2 Directors alone can constitute CSR committee with 2 such Directors alone.
5. CSR Committee shall have a transparent monitoring mechanism for implementation of CSR projects.
6. 2 % of average annual net profits of last 3 years are to be spent on CSR activities.
7. CSR Rules are effective from 1st April 2014. 31st March 2014 will be the date for the purpose of “Block of 3 calendar years”.
8. CSR activities should not include the activities undertaken by the Company in its normal course of business.
9. CSR policy as approved by the committee and Board shall be displayed in the Company’s website, if any.
10. CSR activities can be done through a trust or registered society or Company established by the Company – or its Holding or subsidiary Company. If such trust is not established by the Company or its Holding or subsidiary Company, it shall have a track record of 3 years in undertaking similar projects.
11. Schedule VII of the Companies Act 2013 (remember, it was in the Act not in the Rules) - which lists out the activities that may be undertaken by the Company is modified. The first point on it earlier stated that “ To eradicate extreme hunger”, which many of the speakers at various forums (including me) used to criticize. Now the word “extreme” is removed and now companies can do CSR activities for eradicating hunger. It need not be extreme hunger.
12. Three important additions that I could see in the list of activities are:
a. Measures for the benefit of armed force Veterans, war widows and dependents.
b. Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government.
c. Rural development projects.
There was an item is Schedule VII “Combat HIV, Malaria or other diseases”, which has been removed.
13. Projects or programs relating to activities undertaken by Board based on the recommendations of the CSR committee or Board will also be included (Subject to one condition – CSR Policy to state that it will cover subjects mentioned in Schedule VII )
14. For calculating Net profit of the Company, the following shall be omitted/ need not be included:
a. Any profit arising from overseas branch – whether operated as a separate Company or otherwise
b. Any dividend received from other Companies in India
15. A Foreign Company or Holding or Subsidiary Company having a branch office or project office in India shall also comply with Sec. 135 and related Rules. Turnover, Netprofit or Networth of such Company for the purpose of this calculation shall be made as per Sec. 198 and Sec. 381 of Companies Act 2013.
16. An annual report on CSR activities is to be included in Board’s report; the format of the same has been provided by MCA.
2. Hunger need not be extreme; Ordinary hunger also is fine....
3. Private Companies and unlisted Public companies are exempt from appointing Independent Director in CSR Committee
4. Private Companies also need to comply with CSR and the can have 2 Directors in its committee (if there are only 2 Directors in its Board)
Please read.............
CSR Section & Rules Notified – What has changed & What remains the same
By : CS. Mohan Kumar Company Secretary, Chennai
1. Sec. 135 of the Companies Act dealing with CSR is notified vide Notification dated 27th Feb, 2014. It will be effective from 1st April 2014.
2. Every Company having networth of 500 crores or Turnover of 1000 crores or Net profit of 5 crores need to constitute a CSR committee. It shall have minimum of 3 Directors and one of them shall be independent Director.
3. Unlisted Public Company or a private Company which needs to comply with CSR provisions shall have CSR committee without the Independent Director
4. A private Company having 2 Directors alone can constitute CSR committee with 2 such Directors alone.
5. CSR Committee shall have a transparent monitoring mechanism for implementation of CSR projects.
6. 2 % of average annual net profits of last 3 years are to be spent on CSR activities.
7. CSR Rules are effective from 1st April 2014. 31st March 2014 will be the date for the purpose of “Block of 3 calendar years”.
8. CSR activities should not include the activities undertaken by the Company in its normal course of business.
9. CSR policy as approved by the committee and Board shall be displayed in the Company’s website, if any.
10. CSR activities can be done through a trust or registered society or Company established by the Company – or its Holding or subsidiary Company. If such trust is not established by the Company or its Holding or subsidiary Company, it shall have a track record of 3 years in undertaking similar projects.
11. Schedule VII of the Companies Act 2013 (remember, it was in the Act not in the Rules) - which lists out the activities that may be undertaken by the Company is modified. The first point on it earlier stated that “ To eradicate extreme hunger”, which many of the speakers at various forums (including me) used to criticize. Now the word “extreme” is removed and now companies can do CSR activities for eradicating hunger. It need not be extreme hunger.
12. Three important additions that I could see in the list of activities are:
a. Measures for the benefit of armed force Veterans, war widows and dependents.
b. Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government.
c. Rural development projects.
There was an item is Schedule VII “Combat HIV, Malaria or other diseases”, which has been removed.
13. Projects or programs relating to activities undertaken by Board based on the recommendations of the CSR committee or Board will also be included (Subject to one condition – CSR Policy to state that it will cover subjects mentioned in Schedule VII )
14. For calculating Net profit of the Company, the following shall be omitted/ need not be included:
a. Any profit arising from overseas branch – whether operated as a separate Company or otherwise
b. Any dividend received from other Companies in India
15. A Foreign Company or Holding or Subsidiary Company having a branch office or project office in India shall also comply with Sec. 135 and related Rules. Turnover, Netprofit or Networth of such Company for the purpose of this calculation shall be made as per Sec. 198 and Sec. 381 of Companies Act 2013.
16. An annual report on CSR activities is to be included in Board’s report; the format of the same has been provided by MCA.
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This is a very quick analysis; any comments, observations or errors in this analysis/ interpretation may be kindly informed to us & we shall stand corrected. Thanks
Whether the calculation (turnover, profit, networth) is on consolidated basis or stand alone basis?
ReplyDeleteWhether the company can claim 80G exemption based on the contribution made to PM's National relief fund or any other fund for that matter?
ReplyDeleteIf a Company satisfies the basic criteria and has loss for the previous 3 years, then what is the situation? Can such a company still spend on CSR activities?
ReplyDeleteI hope the basic criteria is to formulate the committee and only those companies having profits as per Sec 198 alone have to spend for CSR.
ReplyDeleteSharing my views on the questions raised; these are my personal interpretation & we need to wait and watch how the law comes up:
ReplyDelete1. Calculation of turnover, profit, networth, etc shall be calculated on stand alone basis only.
2. Company can claim 80G exemption based on the contribution made to PM's National relief fund or other notified funds.
In fact it is one of the main criticism for CSR activity. If you contribute to PM relief fund, you will get eligibility for CSR purpose and tax exemption also will come automatically without dispute. Also you need not spend much time and resource for CSR activity. So some critics are saying that many companies will prefer this route rather than regular CSR activities.
3. For Aaashis's question, Priya has already answered, which is correct.
Sir,
ReplyDeleteI am from Real estate Company and we are ransfering 1% of our constrcution cost(which is above 2% of Average Net Profit for last 3 year) into labour cess which is created for the benefit of Labour. Can we count that amount as CSR activity??Please suggest.
Mr.Abhishek that will not be treated as CSR Activity as this benefits only your labourers. This is my view after reading the section and rules. Learned Members may correct me if i am wrong.
ReplyDelete