CORPORATE SOCIAL RESPONSIBILITY

The Companies Act, 2013 (“Act”) had inter alia introduced the concept of Corporate Social Responsibility (“CSR”). The requirements concerning CSR were completely unknown to both the regulator and the industry alike. That being said, the provisions being hailed by the social activists with two percent of the net profits of the corporate giants being allocated towards social initiatives. We illustrate below some of the key considerations vis-à-vis CSR.

Definition

In terms of Rule 2 (c) Companies (Corporate Social Responsibility) Rules, 2014 (“CSR Rules”) as amended from time to time, CSR means and includes:

  • Projects or programs relating to activities specified in Schedule VII to the Act; or
  • Projects or programs relating to activities undertaken by the board of directors of a company (“Board”) in pursuance of recommendations of the CSR Committee of the Board as per declared CSR Policy of the company subject to the condition that such policy will cover subjects enumerated in Schedule VII of the Act.

Applicability.

Every Indian company including its holding or subsidiary company and a foreign company (body incorporated outside India, which has a place of business in India whether by itself or through an agent, physically or through electronic mode, and which conducts any business activity in India in any other manner) having its branch or project office in India, would be required to constitute CSR committee from amongst the Board if its fulfils any one of the below mentioned criteria during any of the preceding three financial years:

  1. Net worth of Rupees Five Hundred Crores or more; or
  2. Turnover of Rupees One Thousand Crores or more; or
  3. Net Profit of Rupees Five Hundred Crores or more.

Composition of the CSR Committee:

Every company satisfying any one of criteria as mentioned above would be required to constitute a CSR committee with three or more directors out of which at least one director shall be an Independent Director, barring in case of:

  1. A company which is not required to appoint an Independent Director shall have its CSR committee without such director.
  2. A private company having only two directors on its Board shall constitute its CSR committee with such two directors.

A foreign company meeting the aforementioned criteria shall constitute a CSR committee with a least two persons of which one person shall be a resident Indian and another person shall be nominated by the foreign company.

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