Corporate Social Responsibility ~ FAQ

FAQs on Corporate Social Responsibility:

1. Which company to be covered under section 135 of COA, 2013?
A) Every company, its holding and subsidiary company and foreign company having branch/project office in India having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year. (Section 135 of COA, 2013 read with Rule 3 of CSR Rules, 2014)
B) A company shall be exempted from compliance under sec 135 of COA,2013 if it is not falling in the ambit of section 135 (1) for the last three consecutive years.


2. State the responsibilities of company in regard to CSR?
A) To constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
B) Spending at least 2% of average net profits of the previous three years will have to be spent on corporate social responsibility activities 
C) To disclose to shareholders about the policy adopted in the process, giving reasons on failure of implementation.

3. State the contents of Board’s Report in regard to CSR?
A) Composition of CSR committee 
B) Contents of Policy 
C) Failure to spend amount shall, the reasons for non-compliance 
D) Annual report on CSR containing particulars specified in the CSR Rules, 2014.

4. State the responsibilities of Board in regard to CSR?
A) Shall approve the CSR Policy based on recommendations made by the CSR Committee. 
B) Shall disclose contents of such Policy in its report and also place it on the company’s website.
C) Shall ensure the expenditure @ 2% of average net profits of the company made during the three immediately preceding financial years.
D) Shall ensure that the activities as are included in CSR Policy of the company are undertaken by the company. 

5. What are the functions of Corporate Social Responsibility Committee?
A) Formulate and recommend to the Board, a Corporate Social Responsibility Policy
B) Recommend the amount of expenditure to be incurred under CSR
C) Monitor the Corporate Social Responsibility Policy

6. What should be the major contents of CSR policy should be?
A) List of all projects and programs for CSR activities along with the modalities if execution of such project or programs and implementation schedules for the same.
B) Monitoring process of such projects or programs.
C) Surplus arising out of CSR projects shall not form part of business profit of the company.

7. What are the activities which can be done under CSR? (Amended Schedule VII of Companies Act, 2013)
A) Activities which may be included by Companies in their Corporate Social Responsibility Policies:
eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation including contribution to the Swacch Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water;
promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects;
promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;
ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund setup by the Central Government for rejuvenation of river Ganga;
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:
measures for the benefit of armed forces veterans, war widows and their dependents;
training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports;
contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women;
contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government
rural development projects;( NOTIFICATION dated 27th February, 2014)
slum area development.( NOTIFICATION dated 6th August, 2014)
 Explanation.— For the purposes of this item, the term ‘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.”

B) Contribution to corpus of a trust/society/ section 8 companies will also be included in the CSR expenditure if created exclusively for the same or the specific corpus is made for that specific purpose.
C) Expenditure on Administrative Overheads (max. 5% of total CSR expenditure of the company in one financial year).
D) Expenses excluded from CSR expenditure:
i. Contribution to political parties not included.
ii. Exp. Benefitting only employees, their families not included.
iii. One-off events such as marathons/ awards/ charitable contribution/ advertisement/ sponsorships of TV programmes etc. would not be qualified as part of CSR expenditure.
iv. Expenses incurred by companies for the fulfilment of any Act/ Statute of regulations (such as Labour Laws, Land Acquisition Act etc.) would not count as CSR expenditure under the Companies Act.

8. What are the means for undertaking CSR activities?
A) Activities can be undertaken by self or by implementing agencies through Institutions with established track records of at least three financial years (max. 5% of total CSR expenditure in one financial year including Expenditure on Administrative Overheads).
B) The Board of a company may undertake its CSR activities through a registered trust / registered society /section 8 company established by the company, either singly or along with its holding or subsidiary or  associate company, or along with any other company or holding or subsidiary or associate company of such other company, or otherwise:
  Provided that-
(i) if such trust, society or company is not established as stated above, it shall have an established track record of three years in undertaking similar programs or projects;
(ii) The project or programs, modalities of utilization of funds on them and monitoring and reporting mechanism for them are specified.

9. What are the consequences of non-compliance to CSR provisions?
A) In case of any non- compliance, the Companies Act, 2013 imposes an obligation on the board to the company at Annual General Meeting (AGM). 
B) No specific provision is provided for non-compliance for spending on CSR under the Companies Act 2013.

10. State the SEBI compliances , if any.
A) Clause 55 of Listing Agreement states that all the listed entities shall submit, Business Responsibility Reports, as part of their Annual Reports, describing the initiatives taken by them from an environmental, social and governance perspective, in the suggested format. One of the format provides for description of Financial Details of the Company under which Total Spending on Corporate Social Responsibility (CSR) as percentage of profit after tax (%) is to be disclosed.