Fwd: Rajya Sabha clears the New Companies Bill, CSR becomes mandatory !
Sanjha Samvad
Good news for development sector!
The Rajya Sabha today approved the much awaited new Companies Bill, making it mandatory for profit making companies to spend on activities related to Corporate Social Responsibility (CSR). In case, a company is not doing so, it will have to explain the reasons for shortfall.
The
Bill was already passed by Lok Sabha in December last year and now only
President’s nod is required to make it a law. The Bill, aimed at improving
corporate governance, also contains provisions to strengthen regulations for
corporates as well as auditing firms.
Moving the bill for consideration, Minister of State (Independent Charge) for
Corporate Affairs Sachin Pilot said private companies, while maximising their
growth, also have responsibility towards society besides equitable and
sustainable growth of the country.
The changes in the Bill include provisions making it mandatory for
companies to spend two% of their average net profit on CSR activities. However,
only companies reporting Rs 5 crore or more profits in the last three years
have to make the CSR spend.
Companies failing to meet the obligation will have to explain and disclose reasons in their annual books of account. Otherwise, companies would face action, including penalty. Pilot emphasized that the Bill aims to encourage firms to undertake social welfare voluntarily instead of imposing that through “inspector raj”. Safeguarding workmen in the legislation, the new law mandates payment of two years’ salary to employees in companies which wind up operations. This liability would be overriding, Pilot said. The amended legislation, with 470 clauses, also limits the number of companies an auditor can serve to 20. It has also brought in more clarity on criminal liability of auditors. Besides, the approved amendments also include annual ratification of appointment of auditors for five years and introduction of a new clause related to offence of falsely inducing banks for obtaining credit. Besides, the changed law allows more statutory powers to the government’s investigative arm Serious Fraud Investigation Office (SFIO) to tackle corporate fraud.
Please find attached bill in detail.
SANJHA SAMVAD
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Jhansi Catholic Seva Samaj
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Fr. Sunil George Konnackal
Dear Sir
Thanks for the information
samaritans satna
Director, Samaritan Social Service Society, Pateri, Mahadeva Post, Satna, Madhya Pradesh, India, Post Code- 485 002 , Phone:-(Office) +917672230098 ,
Joseph Fonseca
Will the corporate sectors share funds with religious organization? Govt need to come out with clear cut guidelines on allocation of 2% profit by corporate sectors. Many giant corporates have their own non profit units e.g TATA and Birla. How much we should expect from such corporate sectors
Regards
JOSEPH FONSECA
Finance - West Zone
1, Namita Apartment,Kevni Everest Lane Off Ceazer Road,
Amboli Andheri (West) Mumbai-400 058
E Mail :jos...@caritasindia.org,
Web: www.caritasindia.org
Mobile 09221476996
Francis P U
Francis PU
Zonal Manager - North
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Bhai Vir Singh Marg - New Delhi - 110001
shipra gupta
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vssingh
>> However, only companies reporting Rs 5 crore or more profits in the last
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Ashok Kumar Sinha
This message is eligible for Automatic Cleanup! (Dear friends,This is something which we all from development sector need to look in to it, probably for three reasons:1. seriously need to think corporate intervention in social sector2. reducing funding scenario in India and globe for development work3. Most of the corporate houses have their own CSR units, what exactly they want to do-is it not that now they will change their policy of business to social business?We all need to think on it, bill is fine, but how far it will be fine is concern!Shipra
On Wed, Oct 16, 2013 at 12:03 PM, Francis P U <fra...@caritasindia.org> wrote:
Joseph Fonseca
Dear Shipra
we need to review views of the NGO's. Companies like Tata and birla's will have add on to their funding for social work which they are presently doing. Important is how Govt is going to monitor usage of CSR funds. Many politicians and their relatives running NGO's will flourish.
Regards
JOSEPH FONSECA
Finance - West Zone
1, Namita Apartment,Kevni Everest Lane
Off Ceazer Road,
Amboli Andheri (West) Mumbai-400 058
E Mail :jos...@caritasindia.org,
Web: www.caritasindia.org
Mobile 09221476996
Sanjha Samvad
Dear all,
The crux of discussion on CRS bill in last 2 months could be as ( also based on some review):
The passage of the revamped Companies Bill in the Rajya Sabha ushers in a new regulatory stance towards corporate social responsibility (CSR) in India. The Bill, which should get enacted into a law in the next few weeks, lays down mandatory requirements in regards to CSR for larger companies (those with at least Rs5Cr net profit/Rs500Cr net worth/Rs1,000Cr turnover), which includes a requirement to spend at least 2% of annual net profit on CSR activities. An estimated 7-8,000 companies in India will be covered under the CSR legislation and the total annual spend based on this norm could be equivalent to US$1-2bn.
Seeking to create an enabling environment
While most discussions in the run-up to the passage of the Bill have focussed on the 2% ‘surcharge’ on corporates’ profits, the moral issues around the government mandating CSR and the potential for misuse of mandated CSR spending; a closer look at the provisions on CSR (Sec 135 of the Bill) reveal that considerable thought has gone into delivering a regulatory framework that nudges companies to start thinking strategically about CSR and aligning these efforts to addressing stakeholder/community needs. There is actually no ‘penalty’ spelt out for not spending the mandated 2%, but the penalties for non-disclosure and the requirement for Board-level oversight of the company’s CSR efforts will itself bring in a more serious, and hopefully, strategic approach to CSR by the Indian corporate sector.
All key social causes covered
In fact, there is considerable flexibility for corporates on the areas that they can address as part of their social responsibility activities, the geographical regions that could be chosen for the intervention and the manner of engagement. While the original Bill listed nine such activities (in Schedule VII), we understand that the final version covers as many as 22 activities – and provides the additional flexibility to the company’s Board to decide on some other activity as well, as long as it is spelt out in the company’s CSR Policy. All the core social needs – including education, healthcare, sanitation, environmental sustainability, employability – are covered under Schedule VII, so the Bill is clearly aiming to align corporates CSR activities with the country’s social development imperatives.
Positioning CSR as an extension of business processes
The Bill clearly demarcates CSR from charity and does not position it as a ‘moral responsibility’ for companies. The accent appears to be on employing standard business principles to develop and roll-out CSR strategies and programs, so as to optimise resources and maximise impact. By requiring CSR policy formulation and monitoring to be governed by a Corporate Responsibility Committee (CSRC) comprised at least three directors (one of whom should be a non-independent director), the Bill is ensuring that CSR becomes a Board level agenda and is therefore viewed strategically and subject to a high level of scrutiny within the company. The activities to be undertaken need to be clearly spelt out in the CSR Policy, approved by the Board, monitored carefully and will need to be disclosed in the Directors Report; a CSR ‘return’, akin to an Income Tax return will have to be filed each year. There are fines and/or imprisonment stipulated for non-compliance on disclosures.
Although the exact rules/guidelines for compliance with the regulation will come out in a subsequent notification, the drafts that have been circulated for comments provide adequate perspective on the regulation’s orientation towards efficiency and impact; activities allowed for CSR spending will need to be in the form of ‘projects’, engagement of experts for implementation is encouraged and monitoring and impact assessment of project is recommended. The rules also exclude spending on employee benefits from ‘allowed CSR’ and underscore the need for clearly defined beneficiaries (especially for environment conservation activities).
Significant capacity building required
After much delay and many rounds of discussion, Sec 135 now looks set to become law and corporates will have no choice but to comply. A few corporates have had well-developed CSR strategies and programs even without the pressure of regulation, and for them, compliance with the new procedures will require little additional effort. But for most, the new regulation will necessitate capacity building in regards to CSR – in terms of understanding the regulation, developing policies, building a governance structure, evaluating and deciding on programs, choosing partners, monitoring and assessing impact of programs.
This will not only be a challenge for companies, but for implementation partners as well – since most NGOs will not be equipped to absorb the significantly higher support (and thus the scale-up in operations) that could arise from the step-up in CSR spend by corporates (we estimate current spending to be significantly below the 2% norm). While the ecosystem will undoubtedly build-up to meet this demand, corporates will need to understand the landscape across different development sectors, evolve those strategies that are impactful and yet most appropriate to their needs and find the right implementation partners programs to help them deliver.
SANJHA SAMVAD