CSR PROVISIONS AND SCHEDULE VII OF COMPANIES ACT,

2013
AUTHOR :CS MITTAL SHAH

https://taxguru.in/company-law/csr-provisions-schedule-vii-companies-act-2013.html

? Applicability of the CSR:

1. Every Company having

– Net worth of Rs. 500 crore or more, or

– Turnover of Rs. 100 crore or more, or

– net profit of Rs. 5 crore or more during the immediately preceding financial year shall constitute
Corporate Social Responsibility Committee Meeting.

2. Every Company including its holding or subsidiary, and a foreign company defined under clause (42) of
section 2 of the Act having its branch office or project office in India which fulfills the criteria shall also comply
with the provisions of Section 135 of the Act.

3. However, if any company ceases to meet the criteria for 3 consecutive financial years then it is not
required to comply with CSR provisions till such time it meets specific criteria.

? Constitution of Committee:

As per CAA, 2020, every company to which CSR criteria is applicable and having CSR spent more than Rs. 50
lakh p.a. shall required to constitute a CSR committee of the Board.

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. A private company having only two directors on its Board
shall constitute its CSR Committee with two such directors. A company is not required to appoint an
independent director pursuant to sub-section (4) of section 149 of the Act, shall have its CSR Committee without
such director.

In case of a foreign Company, the Corporate Social Responsibility Committee shall comprise of two persons of
which one person shall be the person resident in India authorised to accept notices and any document on behalf
of the Company and the other person shall be nominated by foreign company.

It is the duty of the Corporate Social Responsibility Committee to monitor Corporate Social Responsibility
Policy of the Company from time to time.

? Duties of CSR Committee:

1. As per amendment dated 22/01/2021, CSR committee shall formulate and recommend to the Board an
Annual Action Plan in pursuance of its CSR Policy, which shall include the following namely;

Annual Action Plan:

? List of CSR Projects or Programmes

? Areas where CSR projects to be implemented

? Manner of execution

? Modalities of utilization of funds and implementation schedule for the projects

? Monitoring and reporting mechanism for the projects

? Details of need and impact Assessment.

Provided that Board may after such Annual Action Plan at any time during the Financial Year, as per the
recommendation of its CSR committee, based on the reasonable justification to that effect.

? New role of the Board:

? Approve CSR Policy of the company and ensure that CSR activities undertaken by the company as per
policy

? Ensure that the company spends minimum 2% of the net average net profit made during the 3
immediately preceding year.

? Ensure that the Board report cover disclosure

? Ensure that CSR activities are undertaken either by the company itself or through other entity and form
CSR-1 is filled with ROC.

? Monitor implementation of CSR projects or modify such projects, if required

? Ensure that the funds have been utilized for the purpose and manner approved by the board

? CSR Implementation:

The Board shall ensure that the CSR activities are undertaken by the company itself or through –

a company established under section 8 of the Act, or a registered public trust or a registered society,
registered under section 12A and 80G of the Income Tax Act, 1961 (43 of 1961), established by the
company, either singly or along with any other company, or
a company established under section 8 of the Act or a registered trust or a registered society, established
by the Central Government or State Government; or
any entity established under an Act of Parliament or a State legislature; or
a company established under section 8 of the Act, or a registered public trust or a registered society,
registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track
record of at least three years in undertaking similar activities.
A company may engage international organisations for designing, monitoring and evaluation of the CSR
projects or programmes as per its CSR policy as well as for capacity building of their own personnel for CSR.

A company may also collaborate with other companies for undertaking projects or programmes or CSR
activities in such a manner that the CSR committees of respective companies are in a position to report
separately on such projects or programmes in accordance with these rules.

The Board of a company shall satisfy itself that the funds so disbursed have been utilised for the purposes and in
the manner as approved by it and the Chief Financial Officer or the person responsible for financial management
shall certify to the effect.

In case of ongoing project, the Board of a Company shall monitor the implementation of the project with
reference to the approved timelines and year-wise allocation and shall be competent to make modifications, if
any, for smooth implementation of the project within the overall permissible time period.

? Details to be given in Form CSR-1:

Nature of Entity
Entity is established by any company or group company
CIN of Company
PAN of Entity; details of Directors, Board of trustees, chairman, CEO, Secretary and authorized
representative of entity
Email on which OTP be generated
Copy of certificate of registration and PAN should be attached.

? Amount to be spent for CSR:

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.

The board shall ensure that the administrative overheads shall not exceed five percent of total CSR
expenditure of the company for the financial year.

Any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be
ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance
of CSR policy and annual action plan of the company or transfer such surplus amount to a Fund specified in
Schedule VII, within a period of six months of the expiry of the financial year.

Where a company spends an amount in excess of requirement, such excess amount may be set off against the
requirement to spend up to immediate succeeding three financial years.

? CSR Policy:

CSR Policy means a statement containing

1. The approach and direction given by the Board of a company, taking into account the
recommendations the CSR committee.

2. And includes guiding principles for selection, implementation and monitoring of activities.

3. As well as formulation of the Annual Action Plan.

Every Corporate Social Responsibility Committee shall formulate and recommend the Corporate Social
Responsibility Policy to the Board for their approval. The Corporate Social Responsibility policy must contain
the activities as specified in Schedule VII of the Companies Act, 2013 on which the amount is spend as
Corporate Social Responsibility.

? Disclosure in Board Report:

The Board will approve the Corporate Social Responsibility Policy of the company and disclose the Policy on
the website, if any and disclose the contents of the Policy in the Board Report of the Directors.

If the Company fails to spend the amount on the activities of Corporate Social Responsibility, the Company shall
disclose the reasons of not spending in the Board Report of that Financial Year.

? ANNEXURE-II to Board Report:

? Brief outline of CSR Policy

? Composition of CSR Committee

? Web-Link where composition of CSR Committee, Policy and projects approved are disclosed

? Details of Impact Assessment of CSR project, if applicable attach report and give amount spent on
Impact Assessment.

? Details of amount available for set off

? CSR amount spent/unspent for the financial year.

? Details of CSR amount spent against Ongoing Projects and other than ongoing projects for the financial
year.

? Details relating to creation or acquisition of capital asset through CSR spent in the financial year.

? Reason, if company fails to spend CSR obligation.

? Display of CSR activities on its website:

The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and
CSR Policy and Projects approved by the Board on their website, if any, for public access.

? Transfer of unspent CSR amount

Until a fund is specified in Schedule VII for the purposes of subsection (5) and(6) of section 135 of the Act, the
unspent CSR amount, if any, shall be transferred by the company to any fund included in schedule VII of the
Act.

? Procedure for formation of Corporate Social Responsibility

BEFORE CONSTITUTION OF CSR COMMITTEE

1. Check the following in the Balance Sheet of the immediately preceding F.Y.
Net Worth – Rs. 500 Crore or more

Turnover – Rs. 1000 Crore or more

Net Profit – Rs. 5 Crore or more

2. If, the Company falls under the criteria prescribed above, then follow the below mentioned procedure.

3. Issue of Notice for the Board Meeting for the Constitution of Corporate Social Responsibility Committee by
such number of Directors (as may be applicable), as the Members of the Committee.

4. Convene Board Meeting for the Constitution of Corporate Social Responsibility Committee.

AFTER FORMULATION OF CSR COMMITTEE

5. Issue of Notice for Convening Corporate Social Responsibility Committee Meeting for formulation and
recommendation of Corporate Social Responsibility Policy to the Board.

6. Convene Corporate Social Responsibility Committee Meeting for formulation and recommendation of
Corporate Social Responsibility Policy to the Board.

7. Issue of Notice for the Board Meeting for approval of Corporate Social Responsibility Policy.

8. Convene Board Meeting for the approval of Corporate Social Responsibility Policy.

9. Finalisation of Corporate Social Responsibility Policy.

10. Issue of Notice for Convening Corporate Social Responsibility Committee Meeting for recommendation to
the Board for allocation of funds to be spend on the activities of Corporate Social Responsibility.

11. Convene Corporate Social Responsibility Committee Meeting for recommendation to the Board for
allocation of funds to be spend on the activities of Corporate Social Responsibility.

12. Issue of Notice for the Board Meeting for allocation of funds to be spend on the activities of Corporate
Social Responsibility.

13. Convene Board Meeting for the approval for allocation of funds to be spend on the activities of Corporate
Social Responsibility.

14. the Company shall disclose the contents of the policy in the Board Report and if the amount is not spend on
CSR, then the Company shall disclose the reasons for not spending the amount.

? Penalty for Non-compliance

If a company is in default in complying with the provisions of sub-section (5) or sub-section (6), the
company shall be liable to a penalty of twice the amount required to be transferred by the company to the
Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may
be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be
liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund
specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or
two lakh rupees, whichever is less.
 The Central Government may give such general or special directions to a company or class of companies
as it considers necessary to ensure compliance of provisions of this section and such company or class of
companies shall comply with such directions. Where the amount to be spent by a company under sub-
section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the
Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee
provided under this section shall, in such cases, be discharged by the Board of Directors of such company.

? Schedule VII

Activities which may be included by companies in their Corporate Social Responsibility Policies Activities
relating to:-

(i) Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and
sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion
of sanitation and making available safe drinking water.

(ii) Promoting education, including special education and employment enhancing vocation skills especially
among children, women, elderly and the differently abled and livelihood enhancement projects.

(iii) Promoting gender equality, empowering women, setting up homes and hostels for women and orphans;
setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing
inequalities faced by socially and economically backward groups.

(iv) Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare,
agroforestry, conservation of natural resources and maintaining quality of soil, air and water including
contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.

(v) Protection of national heritage, art and culture including restoration of buildings and sites of historical
importance and works of art; setting up public libraries; promotion and development of traditional art and
handicrafts;

(vi) Measures for the benefit of armed forces veterans, war widows and their dependents, Central Armed Police
Forces (CAPF) and Central Para Military Forces (CPMF) veterans, and their dependents including widow;

(vii) Training to promote rural sports, nationally recognized sports, paralympic sports and olympic sports

(viii) Contribution to the prime minister’s national relief fund 8[or Prime Minister’s Citizen Assistance and
Relief in Emergency Situations Fund (PM CARES Fund)] or any other fund set up by the central govt. for socio
economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities
and women;

(ix) (a) Contribution to incubators or research and development projects in the field of science, technology,
engineering and medicine, funded by the Central Government or State Government or Public Sector Undertaking
or any agency of the Central Government or State Government; and

(b) Contributions to public funded Universities; Indian Institute of Technology (IITs); National Laboratories and
autonomous bodies established under Department of Atomic Energy (DAE); Department of Biotechnology
(DBT); Department of Science and Technology (DST); Department of Pharmaceuticals; Ministry of Ayurveda,
Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of Electronics and Information
Technology and other bodies, namely Defense Research and Development Organization (DRDO); Indian
Council of Agricultural Research (ICAR); Indian Council of Medical Research (ICMR) and Council of
Scientific and Industrial Research (CSIR), engaged in conducting research in science, technology, engineering
and medicine aimed at promoting Sustainable Development Goals (SDGs)

(x) Rural development projects

(xi) Slum area development.

Explanation.- For the purposes of this item, the term `slum area’ shall mean any area declared as such by the
Central Government or any State Government or any other competent authority under any law for the time being
in force.

(xii) Disaster management, including relief, rehabilitation and reconstruction activities.