Corporate Social

Responsibility

School of Business Environment

Dr Garima Dadhich
Session
Objectives
 What is Corporate Social Responsibility (CSR)
 Evoluton of Corporate Social Responsibility in India
 Alignment of CSR with vision and mission of organisaton
 Secton 135 of the Companies Act
 Recent Amendments Companies (Corporate Social Responsibility Policy) Amendment Rules,
2021
CSR is all
about…
Corporate Social
Responsibility

CSR can be defned as a concept that encourages the ethical and responsible behavior of
Businesses towards its stakeholders and the communites it practces in

 Contributon in terms of value additon to the society

 a gesture by which the company expresses its concern and commitment towards society’s
sustainable development
CSR in
India
Term may be relatvely new but the concept can be traced back to Mauryan History where
philosophers like Kautlya emphasized on adherence to ethical practces and principles while
conductng businesses
 Was practced in ancient tmes in the form of charity to poor
 Indian scriptures have always propagated the concept of giving and sharing
 History and evoluton of CSR can be traced and categorized into four phases
4 Phases of CSR
in India

Phase 1 (1850-1914) Phase 2 (1914-1960) Phase 3 (1960-1980) Phase 4 (1980 onwards)

• Known for Charity and • Gandhiji’s Trusteeship • Emergence of PSUs for • CSR characterized by
Philanthropy beter distributon of Sustainable
• Urged wealthy of the wealth in society business strategy
• Wealth of Businessmen society to set up trust
used for society welfare for colleges, research • Existng policies lead to • LPG gave an economic
and assistance insttuton etc malpractces which boost which in turn
extended at tmes of triggered suitable caused industry to
calamity legislaton on Corporate contribute towards
governance social development as
well
CSR in Current Indian
Perspective

2021
2010

2012
2007

Adoption of Parliamentary Business

inclusive growth standing responsibili
-11th five year committee on ty
plan finance – 1st reporting
report on
companies bill
009
National voluntary
Voluntary guideline (NVG)on Mandatory provision of
guidelines on social, CSR under section 135
CSR environmental of the companies act,
and economic 013 coming into effect
responsibilities
2011

from 1st April 014

2014
2009

of business, 011
Section 135 of
Companies Act
A company falls under the ambit of CSR
 If the conditon provided below in Immediately preceding FY is satsfed,
◦Net worth >= 500 Crore, or
◦Turnover >= 1000 Crore, or
◦Net Proft >= 5 crore
 Mandatory limit of Expenditure

• at least two per cent of the average net profts of the company made during the three
immediately preceding fnancial years,
Schedule VII of
CSR Benefts to armed forces veterans, war
widows, Police and Para Military forces
Ensuring environmental sustainability, ecological
balance, wildlife & natural resources
conservaton including clean Ganga movement
Incubators

Rural sports, Paralympic and

Olympic sports

Protecton of Natonal Heritage, art

and culture PM Naton Relief Fund
PMCARES

Gender Equality, Women empowerment ,

senior citzens and economically backward
groups Rural Development

Promoton of educaton, special

educaton and vocatonal skills Slum Development

Eradicatng hunger, poverty and malnutriton, promotng

health care, sanitaton & safe drinking water including
CSR Disaster Management
including relief and
contributon to Swacha Bharat kosh rehabilitaton
Activities that are
not CSR

CSR activities that benefit the One-off events such as marathons/ Expenses incurred by companies for
employees of the company and awards/ charitable contribution/ the fulfilment of any Act/ Statute of
their families advertisement/ sponsorships of TV regulations
programs etc.

Contribution of any amount Activities undertaken by the

directly or indirectly to any company in pursuance of its normal
political party course of business.
Section 135 : Implementation
Process Agreement with IA Project
CSR Commitee,
Implementaton –
CSR Policy, AAP
Project monitoring

Operatonalizing Project approval by

the insttutonal the board Impact Assessment
mechanism

Project
D ue diligence of
Development with Reportng &
Implementatio Communicaton
Implementatio
n agency
n agency
 Effective CSR Strategy
Development: From Policy to
Project
 CSR: Not A Philanthropy
CSR is not a pure philanthropy
CSR should have a nexus with corporate and business strategies
It should have philanthropic approach
 Major Recommendation of HLC on CSR

Scope of applicability of CSR –LLP and Banks under BR Act

Exemption from constitution of CSR Commitee – below 50 lakhs of CSR
Transfer of unspent CSR – escrow account w/i three years
Detailed reporting on capital asset creation thru CSR projects
Scope of local area – directory
Schedule VII mapped with SDG+ framework
Disclose Assessment study in Board report
Network for CSR
Conduct Annual CSR survey
CSR expert inclusion
Third party assessment on a random basis – 5 % of companies
CSR Audit w/i the purview of statutory fnancial audit
Admin expenses – status quo to be maintained

15
 Recent Amendments
Companies (Corporate Social Responsibility Policy)
Amendment Rules, 0 1
Constitution of CSR
Committee

Companies eligible for carrying out CSR and amount to be spent under CSR is exceeds Rs. 50
lakhs.

3 or more directors, out of which at least one director shall be an independent director,
where appointng independent director is mandatory by companies.

 In other cases 2 or more directors.

 To summarize -
• Listed Companies - Independent Director
• Unlisted Companies – 3 or more Directors, Independent Director – if it is mandatory for the company
• Private Companies – 2 or more, no Independent Director required
• Foreign Companies – At least two persons out of which:
(a) one shall be as specifed under clause (d) of subsecton (1) of secton 380 of the Act, and
(b) another shall be nominated by the foreign company.
Role of CSR
Committee
Formulate and recommend CSR Policy to the board

Recommend actvites and the amount of expenditure to be incurred on CSR

actvites

Formulate and recommend to the Board, an annual acton plan

Monitor the CSR policy from tme to tme

Role of
Board
 Approve the CSR policy;
 Disclose contents of such policy in its report and also place it on the company's website, if any;

 Ensure that the actvites included in the CSR policy are undertaken by the company;
Ensure that the company spends, in every fnancial year, at least two per cent of the average net profts of the
company made during the three immediately preceding fnancial years;

 Satsfy itself regarding the utlizaton of the disbursed CSR funds; and
If the company fails to spend at least two per cent of the average net profts of the company, the Board shall,
in its report made under clause (o) of sub-secton (3) of secton 134, specify the reasons for not spending the
amount and transfer the unspent CSR amount as per provisions of sectons 135(5) and 135(6) of the Act.
 CSR Amendments - Role
ofBoard
The Board
shall ensure that the company spends, in every fnancial year, at least two per cent of
the average net profts of the company made during the three immediately preceding
fnancial years, or

where the company has not completed the period of three fnancial years since its
incorporaton, during such immediately preceding fnancial years, in pursuance of its
Corporate Social Responsibility Policy.
CSR Amendments - Role
of Board
Provided that the company shall give preference to the local area* and areas around it where
it operates, for spending the amount earmarked for Corporate Social Responsibility actvites;

Provided that if the company fails to spend such amount, the Board shall, in its report made
under clause (o) of sub-secton (3) of secton 134, specify the reasons for not spending the
amount. [and, unless the unspent amount relates to any ongoing project referred to in sub-
secton (6), transfer such unspent amount to a Fund specifed in Schedule VII, within a
period of six months of the expiry of the fnancial year].

*The preference to local area in the Act is only directory and not mandatory in nature and
companies need to balance local area preference with natonal priorites.
On-going
Projects
 Mult-year project
Project tmelines not exceeding three years excluding the financial year in which it was
commenced,
Include such project that was initally not approved as a mult-year project but whose duraton
has been extended beyond one year by the board based on reasonable justfcaton.
Administrative
Overheads

The expenses incurred
by the company for
‘general management and administraton’ of CSR Functons
in the company
It shall not include the expenses directly incurred for the designing, implementaton,
monitoring, and evaluaton of a partcular Corporate Social Responsibility project or
programme;
Administratve overheads generally comprise of items such as employee costs, utlites, ofce
supplies, legal expenses, etc. However, expenses which are atributed to the project
implementaton shall be included in project cost only.
 Expenses incurred by implementng agencies on the management of CSR actvites shall not
amount to administratve overheads and cannot be claimed by the company
Implementing
Agencies
 company established under secton 8 of the Act, or a registered public trust or a registered
society, registered under secton 12A and 80 G of the Income Tax Act, 1961 (43 of 1961),
established by the company, either singly or along with any other company, or

 a company established under secton 8 of the Act or a registered trust or a registered society,
established by the Central Government or State Government; or

 any entty established under an Act of Parliament or a State legislature; or

 a company established under secton 8 of the Act, or a registered public trust or a registered
society, registered under secton 12A and 80G of the Income Tax Act, 1961, and having an
established track record of at least three years in undertaking similar actvites.
Implementation
Agency
Registration CSR 1
 Applicable on implementng agency undertaking CSR project/programme.
 Applicable from 1 April 2021 onwards.
st

 Form shall be fled electronically with MCA.

 Shall not afect the CSR projects or programmes approved prior 01st day of April 2021
Surplus arising out
of
 SurplusCSR
refers to income generated from the spend on CSR actvites, e.g., interest income
earned by the implementng agency on funds provided under CSR, revenue received from the
CSR projects, disposal/sale of materials used in CSR projects, and other similar income sources.

Any surplus arising out of the CSR actvites

o shall not form part of the business proft of a company and
o shall be ploughed back into the same project or
o shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy and annual
acton plan of the company or
o transfer such surplus amount to a Fund specifed in Schedule VII, within a period of six months of the
expiry of the fnancial year.
Transfer of Unspent CSR
Funds
If a company fails to spend CSR • Then the company shall transfer on or before 30th September 2022 to the
Funds as mentoned in Schedule VII.
amount for FY 2021-22 as on
31st March 2022

• Then open an account Unspent Corporate Social Responsibility A/c and

If a company is holding the unspent transfer the unspent amount of CSR within 30 days from the close of
amount for ongoing project for FY fnancial year i.e before 30th April 2022.
• Such amount shall be spend within 3 years from the date of transfer
2021-22 as on 31st March 2022
i,e.,
on or before 31th March 2025.

• Then the company shall transfer on or before 30th April 2025 to the Funds
If a company fails to spend amount as mentoned in Schedule VII.
in unspent CSR A/c – for a period of
3 years
Penalty Provision – Section
135
(7) (7)
If a company is in default in complying with the provisions of sub-secton (5) or
sub-secton (6),
◦the company shall be liable to a penalty of twice the amount required to be transferred by
the company to the Fund specifed in Schedule VII or the Unspent Corporate Social
Responsibility Account, as the case may be, or
◦ one crore rupees, whichever is less, and every ofcer of the company who is in default shall
be liable to a penalty of one-tenth of the amount required to be transferred by the company
to such Fund specifed in Schedule VII, or the Unspent Corporate Social Responsibility
Account, as the case may be, or two lakh rupees, whichever is less
Excess CSR Expenditure – Set
off

Funds
Any excess can be setof up to immediate succeeding three fnancial years.

Shall not be adjusted with the surplus arising from CSR projects/programme.
 Board resoluton will be required.

 For example –
The mandated requirement to spend amount under CSR for FY 2021-22 is Rs. 1 Crore.
In FY 2021-22, the company spent Rs. 1.5 crore towards CSR for implementng the project of FY
2021-22.
The excess amount spent i.e. 50 lakh shall be carried forward for setof against the mandated
limit of amount of CSR in FY 2022-23, FY 2023-24 and FY 2024-25.
Capital
Assets
Assets created by CSR amount shall be held by -
(a) a company established under secton 8 of the Act, or a Registered Public Trust or
Registered Society, having charitable objects and CSR Registraton Number under sub-
rule (2) of rule 4; or
(b) benefciaries of the said CSR project, in the form of self-help groups, collectves, enttes;
or
(c) a public authority
If amount spent by company on capital asset prior to Assets shall be transferred to the persons mentoned
CSR amendment Rules 2021. above within 180 days from the commencement of
requirement of Rules, can be extended further 90day
with board approval.

If Budgeted CSR spend is on creaton of asset by company Assets shall be held by the person mentoned above.
afer the amendment Rules 2021
Impact
Assessment
 Responsibility of company and not the implementng agency.
 Independent agency to be hired
Applicability - Average CSR obligaton >=10 crore or more in the three immediately preceding
fnancial years.
 CSR projects outlays >= one crore
 Impact study done afer completon of one year of project
 Expenditure is booked under CSR and not admin by Company.
 Expenditure < 5%percent of the total CSR expenditure for that fnancial year or ffy lakh
rupees, whichever is less.
Queries, if any….

Thanks….
garima.dadhich@iica.in
garima.dadhich@gov.in