Corporate Social Responsibility amendments.pptx

Corporate Social Responsibility is the topic which Organization faces in their operational front.

1. CORPORATE SOCIAL RESPONSIBILITY Recent changes and Provisional Amendments in different stages

2. CSR:

3. Comply or Explain to Comply or pay -Prior to Companies Amendment Act, 2019, CSR was not mandatory at that time and the approach was to “comply or explain”. If a company did not comply, it only had to mention the reasons for non-compliance in their report. -Since there were serious compliance gaps, the Companies (Amendment) Act 2019 introduced punishments that included imprisonment, and hence, the approach shifted from “comply or explain” to “comply or pay fine”. -Noncompliance of CSR provisions has been notified as a civil wrong w.e.f. 22nd January, 2021.

4. Amendments flow:

5. Applicability of CSR Provisions Every Company having: Turnover: Rs. 1000 Cr. or more/ Net Worth: Rs. 500 Cr. or more/ Net Profit: Rs. 5 cr. or more -Prior to Companies Amendment Act, 2017 the thresholds were related to any financial year. -After Companies Amendment Act 2017 the trigger criteria are to be seen in respect of financials of immediately preceding Financial Year

6. CSR Expenditure Quantum of CSR Expenditure: Where the Company is in existence for more than 3 years- Minimum 2% of the average net profits of the company made during the three immediately preceding financial years Where the Company has not completed 3 years- during such immediately preceding financial years as per CSR Policy .

7. Limits of CSR Expenditure 1) Administrative Overheads<=5% of the total CSR Expenses of that year 2) In case of any surplus out of the CSR activities then, shall not form part of CSR Business: a)Ploughed back in the same CSR activity b) Transfer to Unspent CSR Account, then spent in CSR Activity and annual action plan of the Company c) transfer such surplus amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial yea

8. Set off excess amount of spending: If CSR Spendings more than the prescribed, then such excess amount may be set off against the requirement to spend immediate succeeding three financial years subject to the conditions that: -the excess amount available for set off shall not include the surplus arising out of the CSR activities , if any. -Board Resolution to this effect.

9. CSR Committee In case of ID, >=3 directors with 1 ID mandatory In case of no ID, >=2 directors In case the CSR spendings comes below 50 lakhs, the Company is not required to form a CSR Committee. In case a company having any amount in its Unspent Corporate Social Responsibility Account as per sub-section (6) of section 135 shall constitute a CSR Committee and comply with the provisions contained in sub-sections (2) to (6) of the said section.

10. Constitution of CSR Committee In case of Unlisted Public Companies: Three or more directors, out of which at least one shall be an independent director. However, if there is no requirement of having an independent director in the company, two or more directors. Private Companies: Two or more directors. No independent directors are required as mentioned in the proviso under section 135(1). Foreign Companies: At least two persons out of which: (a) one shall be as specified under section 380(1)(d) of the Act, and (b) another shall be nominated by the foreign company.

11. Function of CSR Committee: Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company recommend the amount of expenditure to be incurred on the activities referred to in clause (a) monitor the Corporate Social Responsibility Policy of the company from time to time. formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy,

12. Role of Board

13. CSR not to include the following: Activities relating to normal course of business, except the company engaged in R&D of new vaccine, drugs and medical devices related to Covid for FYs: 20-21, 21-22 and 22-23, subject to fulfilment of following conditions; A) R&D from any of the institutes mentioned in item xi of Schedule VII B)Separate disclosure in Annual Report on CSR of Board’s Report Contribution to Political Party-Directly or indirectly Activity taken outside India, except training of Indian Sportsperson representing at national or international level.

14. Activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019. Activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services. Activities carried out for fulfilment of any other statutory obligations under any law in force in India

15. Schedule VII Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and differently abled and livelihood enhancement projects. 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, agro-forestry, conservation of natural resources and maintaining quality of soil, air and water. 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 arts and handicrafts; 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 widows

16. Training to promote rural sports, nationally recognised sports, Paralympics sports and Olympic sports; Contribution to the Prime Minister’s National Relief Fund or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund, or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women. Rural development projects. Slum area development the company shall give preference to local areas and the areas around where it operates

17. Which are the funds specified in Schedule VII of the Act for the purpose of CSR contribution? (i) Swachh Bharat Kosh (ii) Clean Ganga Fund (iii) Prime Minister’s National Relief Fund (PMNRF) (iv) Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) (v) Any other fund set up by the Central Government and notified by the Ministry of Corporate Affairs, for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women.

18. Modes of CSR Implementation

19. Implementing agencies Any entity established under an Act of Parliament or a State legislature A Company established under the Act for charitable purposes or a registered trust or a registered society. Either by Company- Singly or jointly; or Established by Central Govt. or State Govt. ;or Having a track record of atleast 3 years in undertaking similar activities.

20. CSR-1 and CSR-2

21. Calculation of Net Profits

22. Treatment of Unspent CSR Amount N ature of unspent Amount Action Required Timelines Unspent amount pertains to ‘ongoing projects’ Transfer such unspent amount to a separate bank account of the company to be called as ‘Unspent CSR Account’. Within 30 days from the end of the financial year. Unspent amount pertains to ‘other than ongoing projects’ Transfer unspent amount to any fund included in Schedule VII of the Act. Within 6 months from the end of the financial year.

23. Annual Action Plan

24. Ongoing CSR Activities Ongoing Project ” means a multi-year project undertaken by a Company in fulfilment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall include such project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the board based on reasonable justification; In case of ongoing project, the Board of a Company shall monitor the implementation of the project with reference to the approved timelines and yearwise allocation and shall be competent to make modifications, if any, for smooth implementation of the project within the overall permissible time period. The provisions related to ongoing projects have come into effect from 22nd January 2021, i.e., from FY 2020-21 onwards. The said provisions are prospective in effect and not applicable to projects of previous financial years.

25. FAQs on CSR_MCA notified If CSR is applicable on Holding Company, will it be applicable to its Subsidiary company or vice-versa? No, the CSR provisions are Companies specific and hence the Company fulfilling the eligibility criteria shall only be required to comply with CSR Norms. 2) Whether provisions of CSR are applicable to a section 8 Company? Yes, section 135(1) of the Act commences with the words “Every company........” and thus applies to section 8 companies as well. 3) Whether CSR provisions apply to a company that has not completed the period of three financial years since its incorporation? Yes. If the company has not completed three financial years since its incorporation, but it satisfies any of the criteria mentioned in section 135(1), the CSR provisions including spending of at least two per cent of the average net profits made during immediately preceding financial year(s) are applicable.

26. Impact Assessment

27. 4) Can the company spend this amount in the said period of six months on any CSR activity? No, companies are not permitted to spend the unspent CSR amount, other than the amount pertaining to ongoing projects, on any CSR activity during the intervening period of six months after the end of the financial year. Such unspent CSR amount is required to be transferred to any fund included in Schedule VII of the Act.

28. Challenges faced in Practical

29. Disclosures under Board’s Report From 01-04-2020, CSR Report has been mandated as a part of Annual Report with the following particulars: Brief outline on CSR Policy of the Company Composition of CSR Committee: - The web-link(s) where Composition of CSR Committee, CSR Policy and CSR Projects are disclosed. - Impact Assessment of CSR Projects Average net profit of the company and CSR Expenditure. Surplus arising out of the CSR Projects of the previous financial years. - Details of Amount spent on CSR Projects, CSR Amount spent or unspent for FY

30. Details of the Excess set off Details of Unspent Corporate Social Responsibility amount for the preceding three Financial Years Amount spent in administrative overheads and impact assessment Details of unspent CSR amount for preceding three financial years Details of CSR amount spent in financial year for ongoing projects of the preceding financial year(s) Details of capital asset created or acquired through CSR spent in a financial year (asset wise) Reason if the company has failed to spend 2% of the average net profit

31. Non Compliance Penalty Company: Twice the unspent amount required to be transferred to any fund included in Schedule VII of the Act or Unspent CSR Account, as the case may be, or one crore rupees, whichever is less. Every Officer in Default: 1/10th of the unspent amount required to be transferred to any fund included in Schedule VII of the Act or Unspent CSR Account, or two lakh rupees, whichever is less.

32. Regulatory actions on CSR The Adjudicating Officer, Pranay Chaturvedi, Registrar of Companies, NCT of Delhi & Haryana appointed by the Ministry of Corporate Affairs (MCA) recently imposed a penalty in total of Rs.15,40,341.6/- on Comviva Technologies Ltd. and its directors for the delay in transferring Corporate Social Responsibility (CSR) fund.

33. Violation section Penalty imposed on company/ director(s) Calculation for penalty amount Maximum penalty can be imposed A B C D u/s 135 (5) of the Companies Act, 2013 Comviva Technologies Limited 5,50,122*2  =  11,00,244   OR   Rs.1 crore Whichever is lower 11,00,244 Manoranjan Mohapatra, CEO 5,50,122/10= 55,012.20 or 2 lakhs - Whichever is less 55,012.20 Niraj Jain, CFO -do- 55,012.20 Parminder Singh Bakshi , CS -do- 55,012.20 R ajat Mukherjee, Director -do- 55,012.20 Vivek  Satish Agarwal, -do- 55,012.20 Jagdish Mitra, Director -do- 55,012.20 Sunita Umesh, Director -do- 55,012.20 Manishkumar   Murlimanohar Vyas -do- 55,012.20

34. THANK YOU Contact: Shweta Dubey (M):[phone]/ [phone] (E-Mail): [email protected]