Corporate Social Responsibility - Section 135 of Companies Act, 2013

What is CSR?

Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”

-Lord Holme and Richard Watts

There are 3 steps by following which Section 135 can be

complied with:-

Step 1• Check: Does Company Attract the provision of

Sec 135?

IF

YES NO

STOP

Step 2• Constitute CSR Committee.

Step 3• Formulate and recommend CSR policy to the

board

Step 4• Monitor the policy time to time and ensure

implementation.

Sec 135: Applicable to companies which have:-

• Net Profit

• Net Worth

• Turnover

>or=

>or=

>or=

5

500

1000

Crore

Crore

CroreOR

OR

N N T

5 500 1000

Board of Directors

CSR Committee

Formation of CSR Committee:-

• Should have at least 3 Directors. • For listed companies: out of 3 at least 1

director, should be independent director.• A private limited company having only two

directors on its Board shall constitute its CSR Committee with its two such directors.

How much to spend?• At least 2% of the AVERAGE NET PROFIT in 3

immediately preceding FY.

NET PROFIT =

Profit as per New Act(-)

Profits from Operations outside India(-)

Dividend received from Indian Company that has already expended in CSR

Logic: Promote Indian companies to expand operations abroad.

Logic: Dividend itself is a part of profit. Shareholders need not spend on CSR separately.

SCHEDULE VII

Points to remember• Any contribution to political

parties is disqualified.• Any project which benefit

only the employees or their families shall be disqualified.

• Any activity undertaken during the normal course of its business is disqualified.

MOST RECENT ADDITION BY OUR DEAR PRIME MINISTER, MR. NARENDRA MODI

Contributions to Swach Bharat Kosh and Clean Ganga Fund come

under CSR ambit

Reporting Requirements

• The details of the following shall be annually reported:-

• CSR policy, • the composition of the CSR committee, • the amount CSR expenditures, • specifics of individual CSR projects

• A mention of the CSR projects on Companies Website

• No Penalties on non-compliance, just disclose a valid reason in annual statements.

Section 135

?

Why a bane?• Management Burden:

Division if concentration from core operations

• Financial Burden: Companies might have to compromise on their capital expenditure

• Shareholders Wealth Erosion

• Sometimes merely a marketing gimmick

Out of so many options what is the easiest way of compliance?

DONATION IN PRIME MINISTER’S RELIEF FUND

• Benefits:-– 100% Tax Exemption– No Managerial Burden– No Accountability

And Why a boon?

• Privatization of Social Welfare – More effective, more efficient• Healthier Environment and People• Progressive in nature• Empowerment of the weak• Bringing out the unused potential

of youth

Conclusion• 2% is no big deal for one corporate. However, when all

companies will contribute 2% each, it will be a huge support for our country’s poor.

• CSR is here to stay. It is the need of the hour of our country and hence we should be finding ways to adhere to it and not dodge it.

• Whenever there are some changes around us, it is our natural tendency to resist it, even when the change is for good. But resisting changes will lead us no where. We all have to accept that change is the only constant. We should be optimistic and make opportunities. For example…..

When a child is made to go to school the first time….And in extreme cases…

But for Optimistic People Opportunity is every where!And in extreme cases…

TATA’s CSR Initiatives• Corporate Social Responsibility

– Tata Steel Rural Development Society (TSRDS)

– Tribal Cultural Society (TCS)– Tata Steel Family Initiatives

Foundation (TSFIF)– Tata Steel Skill Development

Society (TSSDS)– Education

• Medical Services• Urban Services• Sports Department• Tata Steel Adventure Foundation• JUSCO• Other societies like Ardeshir Dalal

Memorial Hospital, Blood Banks, Kanti Lal Gandhi Memorial Hospital etc.)

• Tata Relief Committee

Other Companies Actively Contributing in CSR Initiatives

Thank You Everyone And Please … Keep Smiling!

Made By

SAHIL GOELCRO-0488863Ph. 9891516946Mail – sahil [email protected]

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