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Government seeks CSR spending information under companies law

NEW DELHI: Finding discrepancies in CSR spending data, the government has asked all eligible companies to furnish details about social welfare activities undertaken by them under the companies law .

While the Corporate Social Responsibility (CSR) regulations came into force from April 1, 2014, a clear picture of how much money has actually been spent during the first year of implementation — 2014-15 — is yet to emerge.

Sources said the Corporate Affairs Ministry has asked companies to submit details about utilisation of CSR funds after noticing discrepancies in the data submitted by many of them in their statutory filings.

In this regard, the Registrar of Companies (RoC) has sought information on CSR works from the firms.

A random analysis of filings has indicated discrepancies in submissions about CSR activities. In some instances, firms have submitted that they do not come under CSR regulations while financial data suggest that they indeed come under it, sources said.

The information have been called for by the RoCs to have a clearer picture about compliance with CSR norms, they added.

Under the Companies Act, 2013, certain class of profitable entities are required to shell out at least two per cent of their three-year average annual net profit towards CSR activities. In case of non-spending, the firms have to furnish reasons for the same.

The Act — which is implemented by the Corporate Affairs Ministry — also requires the eligible entities to mention about CSR activities and related spending in the report prepared by their board of directors.

As per the Act, every company having a net worth of at least Rs 500 crore, minimum turnover of Rs 1,000 crore or a net profit of Rs 5 crore or more are required to spend on CSR.

Such entities would have to constitute a CSR committee of their respective board of directors. This panel would formulate and recommend to the board CSR activities that can be taken up by the company.

In March, Corporate Affairs Minister Arun Jaitley had informed the Rajya Sabha that as many as 460 listed firms had disclosed spending Rs 6,337.36 crore towards CSR activities in 2014-15.

Meanwhile, the Ministry has amended rules thereby allowing corporates to carry out CSR activities through non-profit entities and societies set up by governments that do not have three years’ track record in undertaking such projects.

The move would provide entities a wider choice in carrying out CSR works.

CSR activity can be done through “a company established under section 8 of the Act or a registered trust or a registered society, established by the central government or state government or any entity established under an Act of Parliament or a State legislature,” as per the rules.

Section 8 companies are generally not-for-profit entities.

Earlier, only those implementing authorities having three years of established track record in undertaking similar programmes or projects were permitted to carry out CSR works on behalf of companies.

Now, this requirement has been done away with respect to section 8 firms, registered trusts and societies set up by governments.

A government official said the latest amendment to the CSR rules would help in ensuring optimal utilisation of funds set aside for the social welfare activities.

Section 8 entities, registered trusts or registered societies that have been set up by the company concerned, either alone or with another company, are also exempted from the three-year track record requirement.

For entities, that are not set up by the governments or the company concerned, should compulsorily have an established three-year track record to carry out CSR works, as per the notification dated May 23.

“… such company or trust or society shall have an established track record of three years in undertaking similar programmes or projects; and the company has specified the projects or programmes to be undertaken, the modalities of utilisation of funds of such projects and programmes and the monitoring and reporting mechanism,” it noted.


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