AMMENDMENT TO

COMPANY ACT
Wrt CSR CLAUSES

The amendment
The Companies Act, 2013, has called upon

companies having
1. a net-worth of Rs 500 crore or more;
2. or a turnover of Rs 1,000 crore or more;
3. or a net profit of Rs 5 crore or more
.to have a CSR spend of at least 2% of their
average net profits of past three years.

Draft Rules and

regulations
The rules require that "CSR activities may

generally be conducted as projects or

programmes (that do not include normal
business activities)." CSR committees of each
corporate entity covered by these provisions
are required to specify the projects and
programmes that will be undertaken. In
addition, the chapter on guiding principles
contained in the draft rules, emphasize the
need to adopt business process and
strategies. The bottomline outlined in the
guiding principles is: CSR is not charity or

Draft Rules and

regulations
Only activities that are not exclusively for the

benefit of employees of the company or their

family members will be considered as CSR
activities. In other words, if a company
provides elementary education for children of
its plantation workers, such expenditure would
not be eligible CSR spend.

Draft Rules and

regulations
Companies are permitted to collaborate or

pool resources with other companies for

undertaking CSR activities. Companies can
also engage in CSR activities through external
agencies such as NGOs. However, in such
cases, the NGO must have an established
track record of at least three years of carrying
on activities in those areas.

Draft Rules and

regulations
CSR programmes by a company may also

focus on integrating business models with

social and environmental priorities. For
instance, a company that has set up a
vocational training centre can sell the
products made by such centre. "It may be
possible to utilize manufacturing by-products
for making items such as soaps," illustrates a
CSR consultant. The only caveat in this case is
that the profits if any, will not be part of the
business profits of the company.

Draft Rules and

regulations
Companies can now, via the foundations set up

by them engage in CSR activities.

A monitoring mechanism will need to be in
place.
The draft rules specify that the tax treatment of
CSR spend will be in accordance with the IT Act,
and as may be notified by the CBDT.
The list of activities eligible for CSR was

specified in the Schedule to the Companies Act.

Draft Rules and

regulations
These include eradicating hunger and

poverty; promotion of education, women

empowerment; reducing child mortality and
improving maternal health; environmental
sustainability; employment enhancing
vocational skills or contributions to central or
state government set up funds, including the
PM National Relief Fund.