Understanding the Companies Act, 2013 · Evolution of Companies Act 1956 • Definition of public and private company • Members and ownership • Definition of nonprofit company

October 31, 2013

Understanding the Companies

Act, 2013

Housekeeping

• Place your phone on “mute”

• Use the question box

• #svcfindia

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Agenda

1. Introduction

2. Kabir Kumar

3. Dr. Bhaskar Chatterjee

4. Pushpa Aman Singh

5. Q&A

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Speakers

Kabir Kumar

Silicon Valley Community Foundation

Dr. Bhaskar Chatterjee

Indian Institute of Corporate Affairs

Pushpa Aman Singh

GuideStar India

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Evolution of Companies Act

1956

• Definition of public and

private company

• Members and ownership

• Definition of nonprofit

company

• Registration guidelines

2013

• New types of companies

including one person

company

• Increased guidance

around governance

• New audit practices

• Emphasis on reporting

Section 25 company

Section 8 company

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Overview of CSR Section

• Eligible companies must spend 2% of average net

profits on CSR activities

• A committee must be formed to oversee these

mandated expenditures

• The committee develops a CSR policy which the

Board signs

• CSR activities must be monitored and reported on

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Is My Company Eligible?

Net worth of Rs. 500 crore

(US$81M)

Turnover of Rs. 1,000 crore

(US$162M)

Net profit of Rs. 5 crore

(US$1M)

Based on revenues generated in India

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Role of the Committee

Policy Activities Monitor Report

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Eligible Activities/Expenditures

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Reporting Requirements

Effective beginning

FY14-15:

• CSR must be included

in annual report

materials

• Publish CSR policy

and report activities

online

Annual

Report

CSR

Report

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Dr. Bhaskar Chatterjee

Indian Institute of Corporate

Affairs

Dr. Bhaskar Chatterjee

DG&CEO

Indian Institute of Corporate Affairs

Highlights of provisions of the Companies Bill Relating to CSR

SECTION 135

1)Every company having a net worth of rupees five hundred crore or more (100 million $ or more),or a turnover of rupees one thousand crore or more (200 million $ or more) , or a net profit of rupees five crore or more (1 million $ or more) during any financial year shall 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;

2)The Board's report shall disclose the composition of the Corporate Social Responsibility Committee.

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SECTION 135 {CONTD.}

3) The Corporate Social Responsibility Committee shall,

a. 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;

b. recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

c. monitor the Corporate Social Responsibility Policy of the company from time to time. 15

SECTION 135 {CONTD.}

4) The Board of every company referred to in sub-section (1) shall,

a) After taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose the contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and

b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

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SECTION 135 {CONTD.}

5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

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SECTION 135 {CONTD.}

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 activities;

Provided that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.

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If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

Sub Section (8) of Section 134

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What is CSR and what is not?

What is CSR? What is not CSR?

It should be rupee measurable; That which is not rupee measurable is not a CSR activity;

It must bring direct benefits to marginalized , disadvantaged, poor or deprived section of the community/ies;

If it does not benefits the poor & backward section of the community it is not a CSR activity;

It should not pre-dominantly benefit employees of the company;

Employee benefits will not count as CSR;

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What is CSR and what is not?

What is CSR? What is not CSR?

It can be related to the core business or the business model. It can thus deliver shared value;

It must not be part of the core business of the company;

The quantum of value in monitoring terms which the target group will derive must be shown and clearly identified;

The total value of the project itself cannot be shown as CSR;

It must be a sustained activity over a period of time;

One-of or intermittent activities will not count as CSR;

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What is CSR and what is not? What is CSR? What is not CSR?

CSR activities must be in the form of projects/programmes. Thus CSR activities should be projectivized ; Components of a project are as follows: •Need Based Assessment/Baseline Survey/Study •Clearly identified time frame •Specific annual financial allocation •Clearly identified milestones •Clearly identified & measurable objectives /goals •Robust & periodic review & monitoring

Pure philanthropy or mere donations will not count as CSR

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What is CSR and what is not? What is CSR? What is not CSR?

Programmes/projects must be within India;

Programmes/projects undertaken outside India will not count as CSR;

It should be independent of compliances with any regulation or law;

Activities which are in compliance with any regulation or law will not count as CSR;

Projects/programmes can be taken up as social business projects.

Projects from CSR activities should not be shown as commercial/business projects.

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Pushpa Aman Singh

GuideStar India

Are there enough NGOs in India

• 3.17 million NGOs counted by the Central Statistical Organisation

• Traced 694,000 • 55,000 unverified NGO records

with the Planning Commission • 22,735 NGOs filed returns for

foreign contributions • 4,200 registered on GuideStar

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How to identify NGOs partners

• Organization Assessment • Financial & legal compliance • Transparency in public domain • Accountability to public • Good governance practices

• Program Assessment • Track record (milestones accomplished) • Who are current supporters • Reference checks

*No single registrar/ administrator of charities *No common accounting standards, reporting guidelines

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How you could engage NGOs

• Use intermediaries or co-fund • Use existing data and credibility information • Participate in NGO India conference &

exhibition

• Uplift Non profit practice • Review quarterly/ six monthly • Demand factual, verifiable public reporting

• Challenge status quo • Bring your best practices • Report on challenges and not just highlight

success stories

*Giving money is great, give it for high impact *Give your in-kind resources & expertise: infrastructure, IT, managerial, mentoring, employee volunteering

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Existing Resources

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What NGOs want

• We have been working with the community all these years…

• Are we going to get any real support • Every one wants projects, who will support organisation development for greater effectiveness

• Why is our cause not important • Care for the disabled, elderly

• Every one wants a famous NGO, near the airport! • We seek partnerships not vendor contracts • Please do not waste our time! • Giving can be cool … enjoy the heat & dust!

*308 NGOs responded to our mailer to give feedback on rules to the Act *They attend every seminar on CSR to make sense of the “tamasha”

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What you could do for great impact

• Look for high impact projects • Catering to underserved areas • Leveraging government programs

• Invest in the plumbing • Capacity building of the sector • Invest in philanthropy infrastructure • Capacity building of grantees

• Get Involved!

*Giving money is great, give it for high impact *Give your in-kind resources & expertise: infrastructure, IT, managerial, mentoring, employee volunteering

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Thank you! Pushpa Aman Singh (pushpa@guidestarindia.org) Founder & CEO GuideStar India Call +91-22-26856900 /98/ 99 Visit http://www.guidestarindia.org Read http://guidestarindia.blogspot.com Follow http://twitter.com/GuideStarIndia Like http://www.facebook.com/guidestarindia Also, visit our portal on giving to India: http://www.indiagivingnetwork.org

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Q&A

Kabir Kumar

Silicon Valley Community Foundation

Dr. Bhaskar Chatterjee

Indian Institute of Corporate Affairs

Pushpa Aman Singh

GuideStar India

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How SVCF Can Help You

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Resources

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Contact Us

India@siliconvalleycf.org

+1.650.450.5444

siliconvalleycf.org/givingtoindia

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