The Companies Bill 2012 was passed in the Lok Sabha on 18 December 2012. The bill seeks to consolidate and improve corporate governance and further strengthen the regulations for the corporates. One of the noticeable features of the bill is introduction of the most debated concept of Corporate Social Responsibility (CSR). The attached presentation by Ms Gayatri Subramanian, Program Coordinator - CSR & Corporate Governance, Indian Institute of Corporate Affairs, New Delhi, presents a clear picture on the new CSR Bill.

1. CORPORATE SOCIAL
RESPONSIBILITY
THE NEW GAME
CHANGER
10th April, 2013
CHENNAI

2. Historic and Social Economic
Context
Religious background
Charity and Philanthropy
 Principle of Trusteeship
 Social Responsibility - The Western Thought
 Environmental Concerns
 CSR and Beyond
 Business Responsibility- A Holistic Approach

3.  PM’s Ten Point Social Charter 2007
 MCA and CSR
 Voluntary Guidelines on CSR, 2009
 Released in Dec 2009, in presence of the President of India
 A statement of intent by the national government
 Intended to be replaced by a more comprehensive guideline
 National Voluntary Guidelines on Social, Environmental
and Economic Responsibilities of Business 2011
 Planning Commission and Task Force on Business
Regulation
Government and Business
Responsibility

4. The Indian economy has gained a lot from the
role that corporates have been playing. In
recent years they have become:
 Key drivers of economic growth;
 Delivery mechanisms for change;
 Agents of innovation.
Indian corporate houses today are pervasive
and have tremendous reach cutting across
geographies, ethnicities, culture, languages
etc.
Corporate India: Drivers of Economic
Growth
4

5. The CSR provisions of the Bill seek to create an
enabling environment;
They will allow corporates to harness and
channelize their core competencies as well as
develop effective business models;
They will promote and facilitate far better
connect between businesses and communities.
The Purpose of Inclusion of CSR in the
Companies Bill
5

6. They will facilitate deeper thought and longer
term strategies for addressing some of our most
persistent social, economic and environmental
problems;
They will assist in synergizing partnerships
between Corporates, Governments, Civil Society
Organizations, Academic Institutions and Social
Entrepreneurs.
The Purpose of Inclusion of CSR in the
Companies Bill {Contd.}
6

7. The Bill also provides great flexibility to business
and industry for strategising and conducting their
CSR initiatives;
Intention of government and purpose of bill is not
to make a rigid structure which will constrain the
creativity and imagination of the corporates;
It will actually enhance their efforts, provide an
even broader platform and re-energize their
efforts.
Catalytic Role of the Bill
7

8. There are many outstanding examples of corporate
CSR activity;
Indian entrepreneurs and business enterprises have
a long tradition of working within the values that
have defined our nation’s character for millennia;
Indian businesses have engaged in philanthropic and
charitable activities even from pre-colonial days;
However, in recent times, organizations in India have
shown both innovation and business acumen in
taking up CSR initiatives and integrating them into
their business processes.
Already a Track Record for Corporates
in CSR
8

9. Development-Centric Agenda for
Indian CSR
Our CSR Agenda should be ours. What we do in CSR
should have a strong Indian orientation and we must
use our CSR initiatives to address our particular
Social, Economic and Environmental challenges;
Quite clearly the challenges of the nation should not
and cannot be borne by government alone;
Business resources can be channeled into a diverse
array of programmes to address these problems and
to bring about a sustainable future for all.
9

10. There are a large variety of activities/programmes
to which corporates may direct their energies and
indeed many corporates have developed a great
deal of momentum in areas of their choice;
However, these efforts are largely individual;
 There should be a greater synergy among
corporates to address some areas unitedly, for a
greater impact - otherwise resources would be
spread too thin for tangible outcomes to emerge;
Combined efforts will lead to results that will be
both demonstrable and measurable.
Synergy among Corporates
10

11. Provisions of the Companies Bill
Relating to CSR
SECTION 135
1) Every company having a net worth of rupees five
hundred crore or more, or a turnover of rupees one
thousand crore or more, or a net profit of rupees
five crore 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 under sub-section (3) of section
134 (o) shall disclose the composition of the
Corporate Social Responsibility Committee.
11

12. 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. 12

13. 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. 13

14. 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;
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. 14

15. SCHEDULE VII

16. SCHEDULE VII {CONTD.}

17. Under Clause (o) of Sub-Section (3)
of Section 134
There shall be attached to statements laid before a
company in a general meeting, a report by its Board
of Directors, which shall include:
(o) The details about the policy developed and
implemented by the company on corporate social
responsibility initiatives taken during the year.
17

18. 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
18

19. Guiding Principle
Companies should not limit themselves to using
resources to engage in activities that increase their
profits. They have to be socially responsible
corporate citizens and also contribute to the social
good. Corporate Social Responsibility (CSR) is about
integrating economic, environmental and social
objectives with the company’s operations and
growth. An organisation can accomplish sustainable
development if CSR becomes an integral part of its
business process. 19
Thought process under Companies Bill in
terms of rules

20. 1. These Rules may be called Corporate Social
Responsibility (CSR) Rules, 2013. They shall come
into force on the date of their publication in the
official gazette;
2. Companies may engage in CSR activities in different
modes – projects or ongoing programmes. Such
activities may focus on integrating innovative
business models with social and environmental
priorities and processes in order to create shared
value. Corporate Social Responsibility (CSR) is the
concept whereby organisations serve the interests of
society by taking responsibility for impact of their
activities on stakeholders, communities and the
environment in all aspects of their operations.
20
Thought process under Companies Bill in
terms of rules

21. 3. The CSR Committee of the Board constituted under
section 135 of the Act, while formulating the CSR
Policy subject to Board’s approval, shall specify the
sector along with specific
activities/projects/programmes to be undertaken
during the financial year in pursuance of such CSR
Policy;
4. The CSR Committee shall prepare a comprehensive
monitoring mechanism for ensuring
implementation of the projects / programmes /
activities proposed to be undertaken by the
company.
21
Thought process under Companies Bill
in terms of rules

22. 5. Where a company has set up an organization which is
registered as a Trust or section 8 Company, or Society or
any other form of entity incorporated in India to facilitate
implementation of its CSR activities in accordance with
its stated CSR Policy:
The promoting/contributing company should specify
activities to be undertaken by such an organization
utilizing funds provided by it;
The promoting/contributing company shall establish
a monitoring mechanism to ensure that the allocation
is spent for the intended purpose only; 22
Thought process under Companies Bill in
terms of rules

23. Only such contributions by the
promoting/contributing company as are aligned with
its CSR Policy can be included in the CSR spend, which
qualifies under Section 135 of the Companies Act;
Corpus funds to such organizations by the
promoting/contributing company may also be
included as a part of CSR spends for that year.
However, those funds shall be required to be utilized
in accordance with the CSR Policy of the Company.
However, interest on corpus accrued by the
organization cannot be considered as CSR spend of the
promoting/contributing company;
Subsidiaries, associates and joint ventures may also
contribute to such organisation.
23
Thought process under Companies Bill in
terms of rules

24. 6. A company may also fund programmes of Trusts,
Societies or section 8 companies incorporated in
India, which are not set up by the company itself.
Such spends may be included as part of its
prescribed CSR spend only if such organizations
have established track record of atleast three/five
years in carrying on activities in areas specified by
the promoting/contributing company.
24
Thought process under Companies Bill in
terms of rules

25. 7. Companies are encouraged to meaningfully engage
and consult intended beneficiaries/ target
communities to ensure effective implementation of
CSR initiatives. Companies may collaborate or pool
resources with other companies to undertake the
CSR activities and any expenditure incurred on
such collaborative efforts would qualify for
computing the CSR Spending.
25
Thought process under Companies Bill in
terms of rules

26. 8. Expenditure incurred towards CSR initiatives in
India alone will be counted for the purposes of
compliance under the Act.;
9. Companies are encouraged to build capacity of
their people on CSR across their hierarchy. All
corporate trainings/orientations with regard to
implementation of provisions of Section 135 of
the Act could be included in the CSR spending.
26
Thought process under Companies Bill in
terms of rules

27. 10. Salary, perks of employees engaged exclusively in
CSR activities may be included as part of company’s
CSR spend;
11. Any activity that is undertaken exclusively for the
benefit of employees of the company or their family
members shall not be considered as CSR activity for the
purposes of compliance with this section.
27
Thought process under Companies Bill in
terms of rules

28. 12.All companies falling under the provision of Section
135 (1) of the Act shall report the following on CSR
initiatives as part of the Directors’ Report in the
Annual Report which should also be available on the
company’s website:
All companies are mandated to report on information
as specified in Reporting Framework (Annexure 1);
Whereas all companies shall mandatorily report on
CSR within their Annual Report as specified above, it
is entirely voluntary on part of companies to prepare
detailed CSR reports or include CSR reporting in other
reporting frameworks in India and elsewhere; 28
Thought process under Companies Bill
in terms of rules

29. Brief description on each CSR activity
undertaken during the year stating the date of
commencement and status of implementation
of each activity.;
Any other information or data that would be
relevant and useful to the stakeholders and
authorities to appreciate the CSR activities
undertaken by the company;
The expenditure undertaken by the company
on their CSR activities.
29
Thought process under Companies Bill
in terms of rules

30. 1. Contours of the company’s CSR policy including the
statement of intent reflecting the ethos of the
company, broad areas of interest and activities
proposed to be undertaken. A web-link of the Policy
would be provided;
2. Composition of the CSR Committee of the Board;
3. The amount earmarked/ allocated for CSR spending
in accordance with clause (5) of Section 135.
30
Reporting on CSR Initiatives

31. 4. Details of CSR activities undertaken during the year
in the following or any other format:
31
Reporting on CSR Initiatives…{CONTD.}
S.No. CSR areas identified
in CSR Policy of the
company
Salient features of
the
programme/projec
t/activity
undertaken
Allocation
during the year
(INR)
Spend during
the year
(INR)
1.
2.
3.
Total

32. 5. Observations of the CSR Committee on the
implementation of CSR initiatives by the company
including such other information as may be
relevant and useful to the stakeholders to
appreciate the CSR activities undertaken by the
company;
6. A company may provide information beyond the
mandatory details as mentioned in 4 and 5 above.
32
Reporting on CSR Initiatives…{CONTD.}

33. 7. In case the company fails to spend the amount
prescribed under clause (5) of Section 135; they have
to give reasons for not spending the amount;
8. Activities undertaken in compliance of any other
Central or State Act (other than the Companies Act)
would not count as CSR activities for the purposes of
this clause.
33
Reporting on CSR Initiatives…{CONTD.}

34. In pursuance of item (x) of Schedule VII of the Act, the
following activities may be included by the
companies in their Corporate Social Responsibility
Policy:
Poverty;
Food security;
Education;
Gender Equality and Women Empowerment &
Safety;
Infant and Maternal Health Care;
Public Health, Combating Diseases and Sanitation;
34
Proposed Schedule VII

35. Non-commercial provision of public goods;
Environment, Energy, Ecology, Biodiversity;
Skills, Employment and Livelihoods;
Social Business Projects;
Welfare Measures for the old, homeless and
destitute;
35
Proposed Schedule VII.. {CONTD.}

36. Promoting diversity and inclusion of the
underprivileged;
 Rural Development;
Disaster Management Activities including those
related to mitigation;
Promotion of sports;
Promotion of art, heritage and culture;
36
Proposed Schedule VII.. {CONTD.}

37. Welfare measures for differently - able persons;
Adoption of villages;
Providing alternate energy resource such as solar
energy to the community;
Other matters which the Board may consider to be
appropriate in light of the declared CSR Policy of the
company. 37
Proposed Schedule VII.. {CONTD.}

38. THANK YOU
38