CSR provisions
in
The Companies Bill, 2012
Dr. K K Upadhyay
Head – CSR
January 2013
THE COMPANIES BILL 2012
Former Corporate Affairs Minister, Mr Veerappa
Moily introduced the Companies Bill, 2011 on 14th
December, 2011 in Parliament Lok Sabha. The Bill
was cleared by the Cabinet on November 24, 2011.
On 18th 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 Bill‘s 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.
2.
3.
4.
5.
6.
7.
8.
9.
Eradicating hunger and poverty
Promotion of education
Promoting gender equality and empowering women
Health - reducing child mortality, improving maternal health, combating
HIV, AIDS, malaria
Employment enhancing vocational skills
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
Ensuring environmental sustainability
Social business projects
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