Category Archives: CSR

Corporate Law – Post Election


Unless a general election is crucial there is no purpose to conduct such a huge exercise. The best part of democracy is to give the opportunity for new ideas. Without going to any political prediction we will discuss possible post-election scenario after 23rd May 2019. This may help us to be prepared for the volatility of corporate law in India.

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AMENDMENT: Administration of CSR


In a post earlier here, we discussed provisions of Section 135 read with rule 4 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 regarding Administration of Corporate Social Responsibility Policy. Sub – rule (2) of rule 4 allow board of directors of a company to choose among various options, a better option to administer the CSR Policy. This rule 4(2) was slightly amended by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2015. We discussed those amendment rules earlier here.

Now, a gazetted notification published on 23rd May 2016 in Official Gazette of India, which came into force from same date; amend sub – rule (2) of rule 4.

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REPORT OF THE COMPANIES LAW COMMITTEE – 4


On 1st February 2016, Ministry of Corporate Affairs uploaded the report of Companies Law Committee on its website here. In 4th post on this report, we will discuss recommendations of the committee related to shares, debentures, general meeting, NFRA, Board Report, CSR etc.

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MAJOR RECOMMENDATIONS OF CSR COMMITTEE


The High level Committee constituted by Ministry of Corporate Affairs to suggest measures for improved monitoring of implementation of Corporate Social Responsibility Policies by the companies under Section 135 of the Companies Act, 2013 has submitted its Report to the Government. A copy of report is available here.

We will summarily discuss recommendations of the committee in this post.

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MCA introduces Limited Purpose Independent Director in private companies


An amendment rules notified by MCA introduces concept of limited purpose independent director in private companies. Government is amending existing Companies (Corporate Social Responsibility Policy) Rules, 2014. These rules are being criticised by various eminent jurist for trying to undermine authority of Section 135 of the Companies Act, 2013. Sub – Section (1) of Section 135 mandate for at least one independent director in every company whether it is private or public company. Existing Rule 5 of CSR rules tries to undermine this provision of Section 135 by saying “an unlisted public company or a private company covered under sub-section (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”. A rule being subordinate legislation has no constitutional authority to change a provision of the Act.

Amended Clause (i) of Sub – Rule (1) of Rule 5 reads, “an unlisted public company or a private company covered under sub-section (1) of section 135 shall have an independent director for being member of its CSR Committee and such independent director shall have no other duty, obligation and responsibility under the Act.” Consequently, Clause (i) of Sub – Rule (1) of Rule 5 also been deleted.

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General Circulars on CSR


As we discussed in last post here, government bringing changes in CSR law frequently. With all these development nightmare of CSR may become tax seems to be true soon. In this post, we are discussing General Circulars issued by Government in relation to CSR during first year. There are three circulars General Circular 21/2014 dated 18th June 2014, 36/2014 dated 17th September 2014 and 01/2015 dated 3rd February 2015.

General Circular 21/2014 enumerates following rules for interpretation of CSR Schedule VII of the Companies Act 2013:

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Journey of CSR Schedule in 2014


This is being said in corporate sector, the companies Act 2013 is being treated by government and corporate as CSR law. The schedule related to corporate social responsibility has been amended since its being come into force.

Original CSR Schedule read as under:

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AMENDMENT: Administration of CSR


According to Rule 4(2) of the Companies (Corporate Social Responsiblilty Policy) Rules 2014 as discussed earlier here:

“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.”

Now, Ministry of Corporate Affairs came out with the Companies (Corporate Social Responsiblity Policy) Rules 2015 dated 19th January 2015. These amendments shall come into effect from date of publication. After these amendments above mentioned sub – rule (2) of Rule 4 shall be as under:

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Liberal Interpretation of CSR Schedule


Newly born Indian Corporate Social Responsibility Law is subject to a debate too hot to have it, too tasty politically, socially and economically to avoid it.

In a recent general circular 21 of 2014 dated 18th June 2014, Government of India urged that “the entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule.”

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CSR Policy; Publication and Reporting


CSR policy of Indian companies may have more similarities than any other thing. Section 135 read with Schedule VII of the companies Act 2013 decide four corner of CSR policy of Indian companies, which is guided by and supplementary to development vision of Government of India.

Corporate Social Responsibility committee is primary body to formulate and recommend the CSR policy and expenditure thereon. The committee also has to monitor CSR policy implementation and logically expenditure thereon. The Board of a company may approve the policy and budget allocation for different aspect of CSR initiatives.

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CSR Administration in India


In my recent post on CSR last week, I discussed definition and scope of Corporate Social Responsibility in India after recently notified Rules. Now, I will discuss administration of Corporate Social Responsibility in India.

The Corporate Social Responsibility Committee of the Board of the Company is responsible for administration of Corporate Social Responsibility of the company. The committee shall consist of three or more directors, out of which one shall be an independent director. This provision is equally applicable to all companies including private or small companies.

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Applicability of CSR Law


Newly enacted CSR law is not applicable to all companies. Sub – Section (1) of Section 135 is applicable to all companies; subject to limitation based on its net worth, turnover and net profit. These threshold limits are:

  1. Net worth rupees five hundred crore or more (Rs. 500,00,00,000/-) or rupees five arab
  2. Turnover rupees one thousand crore or more (Rs. 10,00,00,00,000/-) or rupees ten arab
  3. Net Profit rupees five crore of more (Rs. 5,00,00,000/-)

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Defining CSR in India


I discussed Corporate Social Responsibility here, when there was a pending Bill. Now, we have a full fledged corporate social responsibility law in place. Section 135 of the companies Act, 2013, redrafted Schedule VII and the Companies (Corporate Social Responsibility Policy) Rules 2014 will be effective from 1st April 2014. I agree with V. Umakanth  in India CorpLaw say, April 1 this year would mark a new era in corporate law and governance in India with companies being required to comply with the quasi-mandatory obligations regarding CSR, an approach that is fairly unique in the global context.

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MAJOR CAUTIONS UNDER PUBLIC OFFER (COMPANIES ACT, 2013)


In recent posts, we discussed provisions of Chapter III of the Companies Act, 2013. This is time to discuss major penal provisions in this chapter.

CRIMINAL LIABILITY FOR MIS-STATEMENT IN PROSPECTUS (SECTION 34):

Where a prospectus, issued, circulated or distributed:

a)    includes any statement which is untrue or misleading in form or context in which it is included; or

b)   where any inclusion or omission of any matter is likely to mislead;

Every person who authorises the issue of such prospectus shall be liable under section 447 i.e. fraud.

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ALLOTMENT OF SECURITIES (Companies Act 2013)


In recent posts, we have discussed matters related to prospectus. In this post we will discuss, matters related to issue and allotment of securities following public offer.

SECURITIES IN DEMATERIALISED FORM (SECTION 29):

Under this section;

  1. Every company making public offer; and
  2. Such other class or classes of companies as may be prescribed

shall issue the securities only in the dematerialised form.

When any company issue its securities in dematerialised form, provisions of the Depositories Act, 1996 and regulations made under that Act shall be applicable.

There is no bar for any other company to issue its securities in any form. Any other company may convert its securities into dematerialised form.

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Effective Provisions of Companies Act, 2013 as on 12th September 2013


On 30th August 2013 (Bhadrapada 8, 1935 Saka), Ministry of Law and Justice issued a notification regarding the Companies Act, 2013 immediately after it received assent of President of India. Only section 1 of the Act of 2013 came into effect from that day. Section 1 as usual deals with short title, Extent, commencement and application.

Earlier Act of 1956 was applicable to whole of India with some modification related to Indian State of Nagaland, but not applicable Indian state of Sikkim. Act of 2013 is applicable to whole of India including Sikkim and without any exception to any state. Sub – section 4 of Section 1 of Act of 2013 lists out some exception regarding particular classes of companies. However, Act of 2013 is not made effective to Sikkim as on 12th September 2013.

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Quotes from Companies Bill debate in Rajya Sabha


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

For every new law, legislative intent, which show it in debates taken place in Parliament, become important. These debates offer a guide while drafting subordinate legislation. There are many questions about future rules and regulations. I, here, compiled some important quotes from this debates from Rajya Sabha.[i][ii][iii]

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NON – EXISTENT INDIAN


Every mainstream Indian have at least one document who can serve proof of his identity and address. It may be your ration card, voter identity card, driving license or high-profile passport. These documents are your key to gain entry to any place, get reservation in train, open bank accounts, secure phone connection, and even to claim compensation in case of misfortune like accident or death.

We may have multiple identities, true and false identities as government always claim about false ration cards.

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Corporate Social Responsibility under Companies Act 2013


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

The provision related to Corporate Social Responsibility under present Clause  Section 135 of Companies Bill 2012 Act 2013 applies to all companies; listed, unlisted, public, private, one – person subject to limitation based on its net worth, turnover and net profit. These threshold limits are:

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(UN)HAPPY MAY DAY


International Workers Day is just another holiday for socialist and bad memories for capitalists; no care for labours – labour of unorganised sector which constitute majority of Indian Labour.

Unorganised labour and stray dogs are comparable – they should job (bark) when work – pressure come (thief) come and get some stale food thrown to them. They have no owner, brand, organisation, identity, address, region, religion, caste, or life. They are not stakeholders for corporate governance events and not responsibility for responsible business

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