Notification,
File No. 1/18/2013-CL.V, dated 27th February, 2014
G.S.R.________
(E). - In exercise of the powers conferred under Section 135 and
sub-sections (1) and (2) of Section 469 of the Companies Act, 2013 (18 of
2013), the Central Government hereby makes the following rules, namely: -
1.
Short title and commencement. –
(1)
These rules may be called the Companies (Corporate Social
Responsibility Policy) Rules, 2014.
(2)
They shall come into force on the 1st day of April, 2014.
2.
Definitions. –
(1) In these rules, unless the context
otherwise requires, -
(a) “Act” means the Companies Act,
2013;
(b) “Annexure” means the Annexure
appended to these rules;
(c) “Corporate Social Responsibility
(CSR)” means and includes but is not limited to:-
(i)
Projects or programs relating to activities specified
in Schedule VII to the Act; or
(ii)
Projects or programs relating to activities undertaken by the board
of directors of a company (Board) in pursuance of recommendations of the
CSR Committee of the Board as per declared CSR Policy
of the company subject to the condition that such policy will cover subjects
enumerated in Schedule VII of the Act.
(d) “CSR Committee” means the Corporate
Social Responsibility Committee of the Board referred to in section 135 of the
Act.
(e) “CSR Policy” relates to the activities to be undertaken by the company as specified
in Schedule VII to the Act and the expenditure thereon, excluding activities
undertaken in pursuance of normal course of business of
a company;
(f) “Net profit” means the net profit
of a company as per its financial statement prepared in accordance with the
applicable provisions of the Act, but shall not include the following, namely:-
(i).
any profit arising from any overseas branch or branches of the company, whether
operated as a separate company or otherwise; and
(ii)
any dividend received from other companies in India, which. Are covered under
and complying with the provisions of section135 of the Act:
Provided that net profit in respect
of a financial year for which the relevant financial statements were prepared
in accordance with the provisions of the Companies Act, 1956 (1 to 1956) shall
not be required to be re-calculated in accordance with the provisions of the
Act:
Provided further that in case of a
foreign company covered under these rules, net profit means the net profit of
such company as per profit and loss account prepared in
terms of clause (a) of sub-section (1) of section 381 read with section 198 of
the Act.
(2) Words and expressions used and not
defined in these rules but defined in the Act shall have the same meanings
respectively assigned to them in the Act.
3. Corporate Social
Responsibility. –
(1) 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 specified in sub-section (1) of section 135 of the Act shall comply
with the provisions of section 135 of the Act and these rules:
Provided that
net worth, turnover or net profit of a foreign company of the Act shell be
computed in accordance with balance sheet and. Profit and loss account of such
company prepared in accordance .with the provisions of clause (a) of
sub-section (1) of section 381 and section 198 of the Act.
(2) Every company which ceases to be a
company covered under subsection (1) of section 135 of the Act for three
consecutive financial years shall not be required to –
(a)
constitute a CSR Committee; and
(b)
comply with the provisions contained in sub-section (2) to (5) of the said
section, till such time it meets the criteria specified in sub-section (1) of
section 135.
4. CSR Activities.-
(1) The CSR activities shall be
undertaken by the company, as per its stated CSR Policy, as projects or
programs or activities (either new or ongoing), excluding activities undertaken
in pursuance of its normal course of business.
(2) The Board of a company may decide
to undertake its CSR activities approved by the CSR Committee, through a
registered trust or a registered society or a company established by the
company or its holding or subsidiary or associate company under section 8 of
the Act or otherwise:
Provided that-
(i)
if such trust, society or company is not established by the company or its
holding or subsidiary or associate company, it shall have an established track
record of three years in undertaking similar programs or projects;
(ii)
the company has specified the project or programs to be undertaken through
these entities, the modalities of utilization of funds on such projects and
programs and the monitoring and reporting mechanism.
(3) A company may also collaborate with
other companies for undertaking projects or programs 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 programs in accordance with these rules.
(4) Subject to provisions of
sub-section (5) of section 135 of the Act, the CSR projects or programs or
activities undertaken in India only shall amount to CSR Expenditure.
(5) The CSR projects or programs or
activities that benefit only the employees of the company and their families
shall not be considered as CSR activities in accordance with section 135 of the
Act.
(6) Companies may build CSR capacities
of their own personnel as well as those of their Implementing agencies through
Institutions with established track records of at least three financial years
but such expenditure shall not exceed five percent of total CSR expenditure of
the company in one financial year.
(7) Contribution of any amount directly
or indirectly to any political party under section 182
of the Act, shall not be considered as CSR activity.
5. CSR Committees.-
(1) The companies mentioned in the rule
3 shall constitute CSR Committee as under.-
(i)
an unlisted public company or a private company covered under subsection (1) of
section 135 which 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;
(ii)
a private company having only two directors on its Board shall constitute its
CSR Committee with two such directors;
(iii)
with respect to a foreign company covered under these rules, the CSR Committee
shall comprise of at least two persons of which one person shall be as
specified under clause (d) of sub-section (1) of section 380 of the Act and
another person shall be nominated by the foreign company.
(2) The CSR Committee shall institute a
transparent monitoring mechanism for implementation of the CSR projects or
programs or activities undertaken by the company.
6. CSR Policy.-
(1) The CSR Policy of the company shall,
inter-alia, include the following namely:-
(a)
a list of CSR projects or programs which a company plans to undertake falling
within the purview of the Schedule VII of the Act, specifying modalities of
execution of such project or programs and implementation schedules for the
same; and
(b)
monitoring process of such projects or programs:
Provided that the CSR activities does
not include the activities undertaken in pursuance of normal course of business
of a company.
Provided further that the Board of
Directors shall ensure that activities included by a company in its Corporate
Social Responsibility Policy are related to the activities included in Schedule
VII of the Act.
(2) The CSR Policy of the company shall
specify that the surplus arising out of the CSR projects or programs or
activities shall not form part of the business profit of a company.
7. CSR Expenditure.-
CSR expenditure
shall include all expenditure including contribution to corpus, or on projects
or programs relating to CSR activities approved by the Board on the
recommendation of its CSR Committee, but does not include any expenditure on an
item not in conformity or not in line with activities which fall within the
purview of Schedule VII of the Act.
8. CSR Reporting.-
(1) The Board’s Report of a company
covered under these rules pertaining to a financial year commencing on or after
the 1st day of April, 2014 shall include an annual report on CSR containing
particulars specified in Annexure.
(2) In case of a foreign company, the balance
sheet filed under sub-clause (b) of sub-section (1) of section 381 shall
contain an Annexure regarding report on CSR.
9. Display of CSR
activities on its website. –
The Board of
Directors of the company shall, after taking into account the recommendations
of CSR Committee, approve the CSR Policy for the company and disclose contents
of such policy in its report and the same shall be displayed on the company’s
website, if any, as per the particulars specified in the Annexure.
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