Tag Archives: CSR

Donation to National funds

Corporate Social Responsibility becomes a bureaucratic and political method of harassment for Indian companies. It was introduced under “comply or explain” regime but now companies start receiving notices for not complying even if there is an explanation. Without any significant exception, authorities are finding explanations offered by companies inadequate. Recent reports suggest, CSR will virtually be a “comply or deferred comply” regime soon. Now, all critics of law backed voluntary corporate social responsibility now stand correct. Indian companies are facing “voluntarily compulsory” Corporate Social Responsibility, “Transparently Opaque” Electoral Bonds, “politely requested” political donations, as an extension of “extortionist” taxation system.

Before criticizing me for writing a hardcore anti-establishment post at this time of the general election, please check voting pattern of parties inside the parliament and tell me the difference of opinion among political parties on such legal loot. All are the same.

When I last checked Schedule VII of the Companies Act, 2013 as amended four times before being in present form, donation seems to be the best method of corporate social (ir)responsibility. Else a company may choose to fund a project established either by a well-connected politician, bureaucrat, businessperson or goon.

Present Schedule VII of the Companies Act, 2013 recommends the following funds –

  1. Swach Bharat Kosh;
  2. Clean Ganga Fund;
  3. Prime Minister’s National Relief Fund; and
  4. Any other fund set up by the central govt. for socio-economic development and relief and welfare of the scheduled caste, tribes, other backward classes, minorities and women.

Making a donation to these government funds are safe as it requires no planning, no responsibility, no social engagement, no notice, no worries, no explanation.

However, the concept of asking fund is nothing new.

Section 181 of the Act permits a company to contribute to Bona Fide and Charitable Funds etc.

Section 183 of the Act permits a company to contribute to the National Defence Fund or any other Fund approved by the Central Government for the purpose of national defence. I am happy to note in even in this hyper-nationalist and super patriotic time such donation to defence funds are not qualified to be a Corporate Social Responsibility.

Indian companies also permitted to make one more type of donation. This is under The Companies (Donations to National Funds) Act, 1951 (Act 54 of the year 1951). This forgotten Nehru era law came into force on 17th October 1951 and still operative with an objective to enable companies to make donations to national funds.

The Companies (Donations to National Funds) Act, 1951 has only one operative Section. Section 4 of this Act[1] permits Indian companies to donate to –

  1. the Gandhi National Memorial Fund;
  2. the Sardar Vallabhbhai National Memorial Fund;
  3. any other Fund established for a charitable purpose which by reason of its national importance has been approved by the Central Government for the purposes of this section.

It seems nothing was yet notified any other approved fund.

There is another law passed by the state of Gujarat referring to the Gandhi National Memorial Fund (Local Authorities Donations) Act, 1953. There is little information about this fund. Some source suggested that with an amount of $130 million it was once “perhaps the largest, spontaneous, mass monetary contribution to the memory of a single individual in the history of the world.

Sardar Vallabhbhai National Memorial Fund seems to have the same fate now. We have a great statue in the name of the great leader.

This Act is now a law in a legal coma due to a need for political correctness and corporate irresponsibility of few time donations.

I am referring to such a history of legally backed corporate donations to national funds to prove my point. This is the worst method to be socially responsible.

{Note – bura na mano holi hai – take it easy on Indian festival Holi}

[1] Section 4 of this Act read as under –

Any company may, notwithstanding anything contained in the Companies Act or in any other law for the time being in force regulating the affairs thereof, and notwithstanding that the memorandum or articles of association of the company do not enable it so to do, by an extraordinary resolution passed in accordance with the provisions contained in section 81 of the Companies Act, authorise the making of donations to the Gandhi National Memorial Fund or the Sardar Vallabhbhai National Memorial Fund, or to any other Fund established for a charitable purpose which by reason of its national importance has been approved by the Central Government for the purposes of this section.

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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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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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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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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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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