CSR Compliance and Advisory
Compliance relates to the compulsory legal obligation which an undertaking must meet for smooth functioning of business, to avoid unnecessary legal procedures. Compliance cannot be discussed without including the CSR compliances. The corporate social responsibility of an undertaking. CSR is a self-regulating model making businesses socially accountable for their acts. India became the first country to mandate spending on CSR activities through a statutory provision that came into effect from the financial year 2014-2015.
As per Section 135 of the Companies Act 2013, every company with a specified net worth or turnover or net profit is required to mandatorily spend 2 percent of its average net profit towards specified CSR activities. Though many corporate houses in India have been doing CSR activities voluntarily, the new CSR provisions put formal and greater responsibility on companies to set out a clear framework and process to ensure strict compliance.
What Is Corporate Social Responsibility (CSR)?
Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.
To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment, instead of contributing negatively to them. The key idea behind CSR is for corporations to pursue other pro-social objectives, in addition to maximizing profits. Examples of common CSR objectives include minimizing environmental externalities, promoting volunteerism among company employees, and donating to charity.
Understanding Corporate Social Responsibility (CSR)
Corporate social responsibility is a broad concept that can take many forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands.
As important as CSR is for the community, it is equally valuable for a company. CSR activities can help forge a stronger bond between employees and corporations, boost morale and help both employees and employers feel more connected with the world around them.
CSR Includes
List of Permitted Activities To Be Included in Accordance With Schedule VII of the Companies Act, 2013
The Board shall ensure that the activities included by a company in its CSR Policy fall within the purview of the activities included in Schedule VII. Some activities are specified in Schedule VII as the activities which may be included by companies in their Corporate Social Responsibility Policies. These activities are related to:
|
Sr.No |
CSR Activities |
|
1 |
abolishing poverty, malnourishment and hunger, improvising health care which includes preventive health care and sanitation, and making available safe drinking water. |
|
2 |
improvement in education which includes special education and employment strengthening vocation skills among children, women, elderly, and the differently-abled and livelihood enhancement projects. |
|
3 |
Improving gender equality, setting up homes and hostels for women and orphans. |
|
4 |
Introducing the measures for reducing inequalities faced by socially and economically backward groups. |
|
5 |
Safeguarding environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources, and maintaining a quality of soil, air, and water which also includes a contribution for rejuvenation of river Ganga. |
|
6 |
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. |
|
7 |
Areas for the advantage of skilled armed forces, war widows and their dependents. |
|
8 |
Training to stimulate rural sports, nationally recognized sports, Paralympic sports, and Olympic sports. |
|
9 |
Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development providing relief and welfare of the Scheduled Castes, the Scheduled and backward classes, minorities and women. |
|
10 |
Contributions or funds provided to technology incubators are approved by the Central Government. |
|
11 |
Rural development projects. |
|
12 |
Disaster management, including relief, rehabilitation, and reconstruction activities. |
|
13 |
Slum area development where ‘slum area’ shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force. |
Applicability
The provisions of CSR applies to:
It applies to every Company, its holding, subsidiary or Foreign company having in the preceding financial year
Net worth > 500 crore
Turnover > 1000 crore
Net profit > 5 crore
Compliances under CSR
The Board of Directors of the companies are responsible to ensure that the company spends the mandatory CSR spend on specified CSR activities in accordance with the CSR policy of the company and disclose the CSR policy and CSR activities of the company as specified in the provisions.
Each qualifying company should form a CSR committee that will formulate the CSR policy of the company and effectively monitor the CSR activities of the company.
The Ministry of Corporate Affairs (MCA) has issued draft rules on CSR for public discussion. The said draft CSR rules lay down the framework and guidance on the manner in which every eligible company is expected to undertake CSR initiatives
Importance of Corporate Social Responsibility
CSR is an immense term that is used to explain the efforts of a company in order to improve society in any other way.
Role of Board of Directors
The role of the Board of Directors is as follows:
Transfer and Use of Unspent Amount
The specified funds for transfer of unspent amount are:
Contributions made to:
Constitution of the CSR Committee
Duties of the CSR Committee
CSR Reporting
With respect to CSR Reporting, the provisions are as follows :
CSR Policy
CSR Policy elaborates the activities to be undertaken by the Company as named in Schedule VII to the Act and spend. The activities should not the same which are done by the company in its normal course of business
Fines and Penalties for Non-Compliance
In case a company fails to comply with the provisions relating to CSR spending, transferring, and utilizing the unspent amount, the company will be punishable with a minimum fine of Rs 50,000 which may increase to Rs 25 lakh. Further, every officer of such a company who defaults in the compliance will be liable for a punishment which is imprisonment for a term which may extend to three years or with a minimum fine of Rs 50,000 which may increase to Rs 5 lakh, or with both.
How we Assist
Our CSR Compliance team can help clients prepare, implement and monitor a cohesive CSR policy that is not only compliant with section 135 of the Act but also need-based, strategic, integrated with the value chains, iterative, and geared towards business responsibility reporting. Based on our experience and research, we can offer significant value to our clients (at different stages of the CSR lifecycle), with customized services for planning, assessment, implementation, and evaluation, and also provide the following services.
Service Delivery Process followed by White Code Legal:
Service Inclusions
Service Exclusions
Why White Code Legal?
At White Code Legal we prioritize and always strive to deliver excellence. Keeping a focus on maintaining affordable prices and delivering 100% client satisfaction we aim to make worth every penny our clients spend with us and build a lasting relationship with them.