Choose CSR activities but disclose all: MCA may tell firms

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The Companies Bill will be taken up by the cabinet any time now. In the meantime, CNBC-TV18’s Malvika Jain learns that the disclosure of corporate social responsibility (CSR) initiatives has been made mandatory. However, the government has stopped short of defining CSR in the Draft Companies Bill. India Inc has been opposing mandatory CSR for some time now. In fact, industry bodies have strongly opposed even including a definition of CSR in the Bill.

While companies will be free to choose their preferred CSR initiatives, the ministry has laid out an indicative list as a part of its Draft Companies Bill which has been sent for cabinet approval. This list could serve as a benchmark and be treated as ‘ideal’ CSR activities, sources say.

Though there continues to be a provision that companies with a net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more must spend 2% of the net profits on CSR, in case they are not able to do so they can take shareholder approval and list the reasons in their annual report. So a 2% CSR spend will no longer be compulsory; “only a disclosure is mandatory”, sources indicate.

How will the provisioning work
Companies will have to form a three-member committee comprising of three board members of which at least one needs to be an independent director. These three people will decide the company’s CSR policy (activities and expenditure), which will be approved by the board and put up on the company’s website.

( CNBC-TV18’s)

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