by weoweit | Jun 10, 2014 | Uncategorized
Often people ask this question if the new section 135 introduced in the Companies Act, 2013 – mandating certain class of companies to spend 2% of the profits on CSR – is applicable to Foreign companies / MNCs operating in India. The answer is YES – as explained below by the compilation of relevant sections of the Companies Act, 2013 as well as the Companies (Corporate Social Responsibility Policy) Rules, 2014. Clause 3 (1) of CSR Rules: Corporate Social Responsibility Every company including its holding or subsidiary, and a foreign company defined under Section 2 (clause 42) of the Act having its branch office or project office in India which fulfills the criteria specified in section 135 (1) of the Act shall comply with the provisions of section 135 of the Act and these rules. Section 2 (clause 42) of the Indian Companies Act, 2013 “Foreign company” means any company or body corporate incorporated outside India which — has a place of business in India whether by itself or through an agent, physically or through electronic mode; and conducts any business activity in India in any other manner. Section 135 of the Indian Companies Act, 2013 (1) Every company 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 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...
by weoweit | Apr 9, 2014 | Uncategorized
Courtesy: www.SandeepKejriwal.com I am shocked to see that a lot of people are criticizing the upcoming corporate legislation in India (effective 01-Apr-2014) that requires certain companies to spend 2% of their profit (PBT) on CSR. Two common questions being raised on this topic are the following. Companies are already discharging their obligations by paying taxes to the government. Still we have power cuts, broken roads, bad government schools and hospitals etc. So is our government abdicating its own fundamental responsibilities? The profit earned by a company is shareholders’ money. So why should that be used for CSR? If the promoters / directors of the company want to spend on CSR, they should use their personal wealth. And then examples of Bill Gates, Shiv Nadar, Azim Premji etc are used to justify that argument. Here are some eye-opening facts that may help companies appreciate and embrace this law as an opportunity – not only to address the problems around us, but to also create long-term value for the stakeholders. First, Let’s Revisit the Definition of CSR / Sustainability As rightly pointed out in 1987 by the World Commission on Environment and Development – “Sustainable economic development is one that meets the needs of the present without compromising the ability of future generations to meet their own needs.” So, through CSR, we are actually doing ourselves a favour. People often confuse CSR with plain charity in form of financial contributions. According to the draft rules released last year by the Ministry of Corporate Affairs, “CSR is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible...
by weoweit | Apr 9, 2014 | Uncategorized
Courtesy: www.SandeepKejriwal.com The beginning of this month was a landmark day for our nation as the new Companies Act 2013 made it mandatory for certain companies to spend 2% of their average net profit of last three years on Corporate Social Responsibility (CSR). See my other blog on the opportunities we have in front of us and where we are vis-à-vis the global trends in CSR. However, there are still a few gaps in the new legislation as explained below. Taxability of CSR Spend: Under section 37(1) of the Income-tax law, an expenditure is deductible only if incurred for the purposes of business. As far as 2% spend on CSR is concerned, the Income Tax department has not yet clarified its position. There have been so many previous instances where a company has been left in disarray with regard to treatment under two equally applicable statutes. (courtesy: HBL) Scope of CSR Activities: While the MCA has expanded the scope of activities that can be carried out under CSR, it has not expressly clarified that the list is only suggestive and that the companies may choose activities outside of the Schedule as well. This contradicts with the statement made by Mr. Sachin Pilot, the Hon’ble Minister of State for Corporate Affairs, on 5th Nov 2013 at a function organised by the Shiv Nadar Foundation in New Delhi. He had said, ““It is for the board of a company to decide whether to allocate the mandatory CSR funds to a religious trust or philanthropic causes. The government would not like to say where they must spend. If the board of a company decides...
