Corporate Social Responsibility:

Corporate Social Responsibility:

IntroductionCorporate Social Responsibility (CSR) is a duty of company secretary(CS) which implies a concept, whereby companies decide to contribute to a better society and cleaner environment- a concept, whereby the companies integrate social and other useful concerns in their business operations for the betterment of its stakeholders and society in general. The government perceives CSR as the business contribution to the nation’s sustainable development goals. 
DefinitionThe Companies (CSR Policy) Rules, 2014 [Rule 2(1)( C)] provides the exhaustive definition of CSR acitivity which provides that the social responsibility which provides that the CSR activity means and includes but is not limited to:Projects or programs relating to activities areas or subjects specified in Schedule VII to the Act, or Project or programs relating to activities undertaken by the board of directors of a company in pursuance of recommendations of the CSR policy Committee subject to condition activities given in Schedule VII.Explanation: Schedule VII of the Act provides for the list of activities which may be included by companies in their CSR policy  
Applicability of CSR activity: Companies having Net Worth – INR 500 crores or more Turnover- INR 1000 crores or more Net Profit- INR 5 crores or more During the immediately preceding under companies act and financial year. 
Important points to be  considered: For the purpose of this section Net Profit should be calculated according to Section 198 of Companies Act, 2014.Net worth [2(57)] = (paid up share capital+ all reserves + debit or credit balance of P&L a/c)- (accumulated loss+ deferred expenditure+ miscellaneous expenditure not written off) But shall not include reserve created out of revaluation of assets, write- back of depreciation and amalgamation.And all the figures should be taken as per last audited balance sheet A company not required to comply with CSR provision if during the past 3 consecutive financial year has not meet the criteria.In case of specified IFSC public & IFSC private company, section 135 shall not apply for period of 5 years from its incorporation. 
CSR policy Committee: CSR policy Committee shall consists of 3 or more directors, out of which at least one should be Independent director.If in case there is no Independent director or directors less than 3 then the committee can be formed with only 2 directors.No need to constitute committee if CSR activity amount is less than INR 50 Lakhs. 
Duties of CSR policy Committee: Formulate and recommend to the Board- CSR policy Recommend the amount of expenditure to be incurred to the Board Monitor the CSR Policy Execution of such CSR project 
Contents of the CSR Policy: List if CSR activity or program as planed with consideration of Schedule VII Monitoring process of such project or program.Ensure the activity decided are in respect of Schedule VII Shall specify the surplus arising out of CSR activity and shall not be the part of business activities.Specify the amount spend or to be spend on CSR activities. 
Duties of the Board  Approve the CSR Policy Disclosure in Board report and upload CSR policy on website.Composition of Committee CSR Policy Brief outline Reason of unspent amount Details of CSR policy spent during FY.  
Expenditure: 2% of average net profit of the company during the 3 immediately preceding Financial year Or where the company has not completed 3 years of it incorporation then such immediately preceding financial years should be taken into consideration .CSR activities should take place in India and preference should be given to local areas.A company should have Certification for utilisation of funds as a proof of CSR activities done by it.As per rules issued by MCA there is no due stage specified in filling form CSR policy-1 with MC but from 01/04/2021 CSR activity funding will be released only to that NGOs, that are registered with MCA by filling Form CSR-1.As per notification dated 22.01.2021, “Administrative Overheads”  expense incurred by the company on designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project will not be included as part of the administrative overheads but as a CSR activity expenditure.The Board shall ensure that the administrative overheads (AO) shall not exceed 5% of total CSR activity expenditure of the company for financial year. 
 
Specified Unspent CSR policy account: PM Nation Relief Fund PM Cares funds ( Prime Minister’s Citizen Assistance and Relief in Emergency Situation fund)On-going Projects means a multi-year project undertaken by company in fulfilment of its CSR policy obligation having timelines not exceeding 3 years. 
Set offIf company spent excess amount against the requirement can set off in succeeding 3 Financial Year subject to the condition:The excess amount available for set off shall not include the surplus arising out of CSR activities Board of to company shall pass a resolution to that effect
CSR Activities can be done with as per Rule 4(1)  of Companies CSR Policy Rules ,2014Any entity registered under 12A and 8 G of the Income Tax, 1961 Section 8 company Any entity established under an Act of parliament or a state legislature. 
Condition to comply to the entities mentioned in Rule 4(1)  All such entities who want to get CSR policy Funding have to enrol with MCA through Form CSR activity -1 w.e.f 01.04.2021
Activities in Schedule VIIEradication Hunger, Poverty and Malnutrition. Eg: Swatch Bharat Kosh Promoting education Promoting Gender equality Ensue environment stability- soil, air, water. Eg; Clean Ganga Fund Protection of National Heritage Working for Military or for their widows- Central Arm Police Forces (CARF), CPMF, etc.Training and promoting rural sports person PM Cares Fund Contributing to incubators or R&D development projects and promoting Technology Developments. Eg: universities- IIT, DAE, DBT, DST, DRDO, ICAR, ICMRCSIR SDGs, etc.Rural Development projects Disaster Managements.Slum area Developments
Expenditure not considered as CSR activityIncome Tax and any other tax on income Compensation, Damages or other payment made voluntary Loss of wand nature like loss on sale of undertaking of company or any part of there of Any transfer of assets/ liabilities/ revaluation/ equity reserves Any activities taken outside India.Contribution to any Political party Activities base on marketing or advertisement by way of sponsorship Activities benefiting employees of the company  
Expenditure related to Covid-19 any company engaged in research and development activity of new vaccine, drugs and medical devices in their    normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that- (a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act; (b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report; 
CSR activity ReportingDisclosure in Annual report in Annexure attached to it In case of Foreign company, the balance sheet filled under sec 381(1)(b) shall contain Annexure regarding CSR activity report 
CSR Policy needs to mandatorily include:List of CSR activity that are approved to be under takenThe manner of execution of such projects The details of utilization of funds for the projects Implementation schedules for the projects Monitoring and reporting mechanism for the projects Details of impact assessment, if any, for the projects undertaken by the company 
AnnexureA brief outline of company’s CSR Policy with the web link- Projects approved by board Composition of CSR policy Committee Average net profit of the company  for the last 3 Financial year Details of CSR activity spent for the FY Total amount to be spent Amount unspent, if any Manner in which amount spend*Give details of implementing agency*Reason of unspent amount A responsibility statement of CSR policy Committee
PenaltyCompany- twice the CSR amount or 1 crore , {WEL} Office- 1/10 or 2 lakhs {WEL}