CSR provisions

in
The Companies Bill, 2012
January 2013
Dr. K K Upadhyay
Head CSR


THE COMPANIES BILL 2012
Former Corporate Affairs Minister, Mr Veerappa
Moily introduced the Companies Bill, 2011 on 14
th

December, 2011 in Parliament Lok Sabha. The Bill
was cleared by the Cabinet on November 24, 2011.
On 18
th
Dec 2012 the Bill Amendments was
presented by Mr. Sachin Pilot, the current Minster of
Corporate Affairs, at the Lok Sabha and got it
approved.
THE COMPANIES BILL 2012

The Companies Bill 2012 replaces the Companies Act 1956

Lok Sabha passed it in Winter session - December 18, 2012

Rajya Sabha likely to pass it during Budget Session-February
2013

After Rajya Sabha passes the Bill, the assent of the President
of India and the Bills publication in the Official Gazette will
be necessary before the Bill becomes as Act most likely from
April 1, 2013

The New Companies Bill, 2012 have 29 Chapters, 407 Clauses
(Sections) & 7 Schedules


CSR provisions in The Companies Bill, 2012
Corporate Social Responsibility (CSR) has for the first time been recognized in
the Company Law.
Clause 135 (under Chapter IX Accounts of Companies) of the Companies Bill
2012 deals with Corporate Social Responsibility.

Clause 135 contains 5 sub-clauses with one Explanation.

Schedule VII of the Companies Bill 2012 lists out the CSR activities.
This is the first time where a legal provision is introduced for Corporate Social
Responsibility.

CLAUSE 135 : Corporate Social Responsibility

Who must comply?
Every Company registered under the companies law or any previous laws
(Section 1) If (Section-135):
Net worth of rupees 500 crore or more or
Turnover of rupees 1000 crore or more or
Net profit of rupees 5 crore or more during any financial year


Who will be held accountable?

The company will constitute a CSR Committee of the board
members consisting of three or more directors

At least one committee member shall be an independent director


CLAUSE 135 : Corporate Social Responsibility
What will the CSR Committee do?
Formulate and recommend to the Board, a Corporate Social
Responsibility Policy which shall indicate the activities to be undertaken
by the company as specified in Schedule VII
Recommend the amount of expenditure to be incurred on the activities
Monitor the Corporate Social Responsibility Policy of the company from
time to time
CLAUSE 135 : Corporate Social Responsibility
What will be the role of the Board of Directors?
Review the recommendations made by the CSR Committee
Approve the CSR Policy for the company
Disclose contents of the Policy in the company's report/website
Shall ensure that the company spends in every financial year, at least two per
cent of the average net profits
How much will a company be required to spend on CSR?

At least 2% of its average net profit made during the three immediately
preceding financial years
CLAUSE 135 : Corporate Social Responsibility
What are the activities your company can undertake?

According to Schedule VII, Activities as a Project Mode, which may be included by
companies in their Corporate Social Responsibility Policies are:

1. Eradicating hunger and poverty
2. Promotion of education
3. Promoting gender equality and empowering women
4. Health - reducing child mortality, improving maternal health, combating
HIV, AIDS, malaria
5. Employment enhancing vocational skills
6. Contribution to PM's fund or any other fund set up by the Central
Government or the State Governments for socio-economic development
and relief and funds for the welfare of the Scheduled Castes, the
Scheduled Tribes, other backward classes, minorities and women
7. Ensuring environmental sustainability
8. Social business projects
9. Such other matters as may be prescribed
CLAUSE 135 : Corporate Social Responsibility
What does a company need to disclose in the Annual Report?

The Boards financial report under sub-section (3) of section
134, shall disclose the composition of CSR committee, CSR
policy and initiatives
Amount of expenditure incurred on Corporate Social Responsibility activities
Valid reasons in case of failure to spend the earmarked CSR budget
What is likely in the future
In Budget 2013 is likely to allow some tax-deduction /benefits to
companies who spend money for CSR, thus making it attractive for the
companies to spend money for CSR.
An estimated 2,500 companies fall into this mandatory CSR-reporting
category.
CSR activities in the first year would be between rupees 9,000 crore and
rupees 10,000 crore spent in social welfare.
Thank You
For further details:
Dr. KK Upadhyay,
Head, FICCI Aditya Birla CSR Centre for Excellence
FICCI Federation House, Tansen Marg,
New Delhi-110001, India
Email id : kshemendra.upadhyay@ficci.com