Monday, September 23, 2019

CSR is now mandatory and unspent amount to go to PM’s funds

A major focus of the amended Act is on corporate social responsibility (CSR) spending.
The Act mandates that companies with a profit of more than INR 5 crore (US $700,675), turnover of INR 100 crore (US $14 million), and net worth of more than INR 500 crore (US $70 million) have to spend at least two percent of their three years’ annual average net profit towards CSR activities.

Further, companies are now obliged to transfer their unspent CSR funds to one of the funds prescribed under Schedule VII of the Act (such as the Prime Minister Relief Fund) within six months of the end of the financial year and disclose the reasons for non-spending in their annual report.
If the CSR funds are committed to certain ongoing projects, the company must transfer the amount to an unspent account with a scheduled bank within 30 days from the end of the financial year. From here, the amount must be utilized for those projects within three years. If the company fails to spend this amount, it must transfer it to one of the funds mentioned in Schedule VII of the Act.
In case of any violation of the CSR provisions, the company is liable to a minimum penalty fee of INR 50,000 (US$700), which may extend to INR 25 lakh (US$35,034). Further, every defaulting officer of the company may be liable to imprisonment for up to three years, or a fine up to INR 5 lakh (US $7,023), or both.
These changes effectively make CSR contribution mandatory for companies operating in India.

Re-categorization of certain offences

The Act has brought about 16 corporate offences under the ambit of civil liability, including failure to file annual returns and financial statements within a specified time frame, and issuance of shares at a discount. These offences, which earlier attracted criminal proceedings against the offender, are now liable for a penalty.
While this provision will raise the monetary burden on companies, the offenders will not have to face judicial prosecution.

Commencement of business

The Act requires companies to file a declaration within 180 days of incorporation, confirming that every subscriber to the Memorandum of Association (MoA) of the company has paid for the shares agreed to be taken by them.
The companies must also file documents stipulating the verification of their registered address with the Registrar of Companies (ROC) within 30 days of incorporation. The Act empowers the RoC to take strict action against companies that fail to comply with these provisions and remove their name from the register of companies.

Unfit persons not to manage companies

If the federal government is of opinion that the affairs of the company are being conducted in a manner that is detrimental to public interest, it may itself apply to the National Company Law Tribunal (NCLT) for an order to prevent mismanagement and oppression in the company.

Under certain circumstances, the government may also initiative a case against an individual in the company and refer it to the NCLT for inquiries. These circumstances may include among others fraud, misfeasance, persistent negligence, business not conducted with sound business principles or breach of trust.

Associates of foreign companies may follow different financial year for accounting

Previously, the Companies Act required all companies to follow financial year ending on March 31 of every year. It only exempted companies or body corporates holding a company or a subsidiary of a company incorporated outside India to follow a different financial year for consolidation of its accounts outside India. Such companies could apply to the NCLT to allow them a non-March financial year end.
The amendments now extend this exception to associates of a foreign company as well as to a subsidiary of a foreign company that follows a different financial year. Also, the companies can now make the application to the federal government rather than the NCLT – speeding up the time period for processing applications.

Disgorgement of properties in case of corporate fraud

In case of corporate fraud revealed by an investigation by the Serious Fraud Investigation Office (SFIO), the government may make an application to the NCLT to pass appropriate orders for the disgorgement  or giving up of profits or assets of an officer or person or entity, which was obtained an undue benefit.

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Companies will have to pay unused CSR money into state corpus

Cabinet approves changes in provisions of CSR norms under Companies Act

  • Companies will have to deposit their unspent CSR amount to a fund set up by the government

Companies will have to deposit their unused funds meant for corporate social responsibility (CSR) activities to a fund set up by the government for better utilization of resources for public welfare, according to amendments to the Companies Act approved by the Cabinet on Wednesday.
The Companies (Amendment) Bill 2019 cleared by the Cabinet will replace an ordinance issued earlier to help reduce the burden on special courts and to bring down applicable penalties for small companies. In addition, it seeks to bring about a few other changes to the law, which includes the provisions related to CSR. The proposed amendment requires businesses to transfer the CSR amount allocated in specific years to a dedicated fund set up by the government if the company could not utilize it for three years. This would bring accountability to the CSR activities of businesses, said a government official who spoke on condition of anonymity.
Indian companies spend around 15,000 crore a year on CSR, according to information available with the government. The law mandates that firms with a net worth of at least 500 crore or revenue of 1,000 crore or net profit of 5 crore should spend at least 2% of their net profit on CSR. Any failure in this regard should be explained in the annual financial statement.
The Bill also proposes to give more administrative power to the National Financial Reporting Authority (NFRA) for smooth functioning.
Another proposal in the Bill is to ensure that all private limited companies dematerialize their shares. The proposal may be implemented in stages. Dematerialization of shares will help prevent share manipulation and theft of shares.

The Companies (Amendment) Act, 2019 (the Act) came into effect July 31, 2019 and replaced the Companies (Amendment) Second Ordinance, 2019 with certain additional amendments.
The Act will significantly affect corporate compliances and litigation in India.
Companies operating in the country or planning to set up should pay close attention to the changes to understand legal implications as well as to ensure the smooth running of their business in India.
Below, we highlight some of the key provisions of the Act.

Thursday, August 9, 2018

Before sustainability was cool, Indian moms had already mastered the art of recycling

Before sustainability was cool, Indian moms had already mastered the art of recycling

By Ramjaane
When I was growing up, milk packets would be washed and stuck on kitchen tiles for drying – for rotis to be packed in for lunch. After a little wear and tear, mom would fold the plastic packets and use them as a trivet. Long before recycling became hip, every middle-class household practiced it.
Once upon a time, a disciple of Buddha asked him for a new robe. The robe that the disciple was wearing was in tatters. Buddha agreed, gave the disciple a new robe, but asked him what he did with the old one. The disciple said, “I made a curtain of it.” And the old curtain, Buddha asked. “Oh that, I turned into a bed sheet.” And the old bed sheet? “Oh that, I made a mop of it; it was in tatters.” And the mop? “The mop, dear lord, was reduced to a few strands, so I made wicks out of it and light one every evening.” Buddha believed the disciple was enlightened.
I think that disciple is an Indian mom.
Indian mothers repurpose things as if their lives depend on it. Nothing ever dies an untimely death in our homes. What was a curtain at Diwali, will become a sofa cover by Holi. There is nobody more prudent than an Indian mother.
In my house, milk packets would be washed and stuck on kitchen tiles for drying. In these packets, I would be given rotis for lunch. Aluminium foil was never a thing. After a little wear and tear, mom would fold the plastic packets and use them as a trivet of sorts – she’d place them under the oil or ghee container so that her black kitchen counter wouldn’t have a stain. Some milk bags were torn open and glued together with molten wax to create a large plastic sheet – a mat we used on picnics.
Truth is, what was once labelled kanjoosi has now been rebranded as sustainability. What was considered cheap once is cool today.
For the longest time I believed repurposing household items was the forte of kanjoos, Kobra (Kokanastha Brahmin) aais, but when I visited my friend’s houses I realised that their mothers were no different. Recycling (at less embarrassing levels, of course) was practiced everywhere in our middle-class colony. The back pages of calendars doubled up as sketchpads; newspapers became book covers. Glossy magazine paper turned into cones to eat bhel in. Little pieces of cardboard were used as spoons for the bhel, once the puri got soggy. Soft cotton sarees became “paangruns” – sheets to cover yourself when sleeping. Three summer sarees would be stitched together and a cosy duvet for the winter was ready.
The save-the-planet folks should consider appointing an Indian mother as its president. This art of recycling is every environmentalist’s wet dream.
My mother, however, pushed it to the limit. I once mentioned to her how clean a friend’s balcony was, and that his mother washed it daily. Mom took it up as a challenge. She started washing our balcony every day, but without wasting water. She collected the soapy water gushing out of the washing machine in buckets and used it to clean the balcony.
I grew up on bucket baths, not showers. I was taught to use two mugs of water after a wee as a child and was instructed not to empty the flush tank. This is exactly what Cape Town did as they faced Day Zero. “If it’s yellow, let it mellow,” was the advisory pasted on public loos at the airport.
At home, we recycled food too. Marathi cuisine has dishes dedicated to leftover food. Because food is considered poorna Brahma, to waste it was a sin. And what can’t be wasted, must be reused. In Maharashtrian households, leftover rotis are served as “phodnichi poli” (tadka-wali roti) or “poli che ladoo” for breakfast. I have no doubt every kitchen in every corner of India has their own version of the poli and ladoo. Mumbai’s famous pav bhaji was originally a mash of leftover veggies. This no-waste philosophy had as much to do with affordability as it had to do with wastage. It is a mentality, something that most middle-class homesadhere to. Today, in the US, where 40 per cent of food goes to waste, efforts to use leftovers are lauded.
As children we always thought of our moms as cheap; their thrifty ways often embarrassed us. But then, we grew up and travelled the world. We saw Westerners make pen stands of dried coconut shells and models walking the ramp in a recycled paper cup dress, and we were in awe.
The goras took our $4 by calling it sustainable living and we gleefully gave them $5, an extra one for the environment. Today, we are ready to shell out a few thousand bucks on eco-fashion. We now return home and lecture our mothers for using plastic bottles and dabbas. “How can you be so irresponsible, mom?”
Truth is, what was once labelled kanjoosi has now been rebranded as sustainability. What was considered cheap once is cool today. But being frugal is cool only when when are not forced to be economical. Our parents raised us on a strict diet of “zyada paise nahi hai,” so when we saw them recycling, we thought of them as chindi. Their frugality and wisdom was born out of a need and hence was never aspirational.
Today, our disposable incomes are rising, we are seeing a glimpse of abundance for the first time, and hence we don’t hesitate to put out pictures of the curtain which is converted to a shopping bag on Instagram. Because now it’s not longer being cheap, it’s just being #woke.

The article was originally published in Arre.
Ramjaane is an author at Arre.

The Gaps in Implemeting CSR in India

India is one of the only countries in the world to regulate Corporate Social Responsbility (CSR) under the Companies Act, 2013. The law provides a framework to address various developmental challenges. Specifically, 11 areas are listed as eligible developmental activities where a company can spend its CSR money. Companies with a net worth of INR 500 crore or more, or a turnover of INR 1,000 crore or more or a net profit of INR 5 crore or more are required to spend 2% of their average net profit from the last three years towards CSR activities listed in Schedule VII of the Act.
Several different gaps in the implementation of the CSR policy in the country emerge from a detailed analysis of the existing literature on impact assessment. For example, lack of availability of reliable CSR reporting data in one central place, lack of collaborative partnerships between the government, private and civil society sectors across the spending areas, a general lacking in the infrastructure and ecosystem such as skilled professionals, standardisation of evaluation and impact assessment of CSR projects and a lacking of investment in developing effective collaborative platforms, research systems and capacity-building institutions.
Encouragingly, the CSR expenditure during the year 2016-17 has increased by 41% as compared to 2014-15. There is also a growing trend in companies’ interest to invest in unique flagship projects which can be also seen as a trigger for investment into innovative ways of tackling challenges of sustainable development. Schedule VII gives overall direction to corporations and the Sustainable Development Goals (SDGs) could become the measurable outcomes from the CSR projects.
Aligning SDGs to CSR areas of Schedule VII
SDGs were adopted on the September 25 in 2015 in Paris where 193 countries, including India, ratified and signed the convention to accomplish the 17 goals with its 169 targets by 2030. The goals take a pragmatic approach to achieve sustainable growth at all levels of the social, economic and environmental dimensions of the planet making it probably one of the most holistic development models evolved. The SDGs have also evolved to provide flexibility to nations and organizations alike to develop action plans to achieve the set targets thus providing a roadmap for the next 12 years.
India has set itself ambitious targets for implementation of the SDGs by aligning it with the national development agenda including setting up a monitoring dashboard in its Niti Aayog. India almost considered as a poster child of the SDG community, needs to make large investments and the achievement of these goals may not be possible with government initiatives alone. Rather it needs a high level of collaboration between the government, private sector and the civil society. The accelerating pace of collaboration between the social and private sectors could be positively leveraged by using the SDG targets and indicators as measurement tools for outcomes and impact of the CSR spending.
Ensuring Environmental Sustainability
The best case for tagging CSR areas in Schedule VII to SDG goals and its targets and indicators is area number 4: Ensuring Environmental Sustainability, which as noted earlier receives less than 10 % of CSR money spent by its corporations. Environmental sustainability as specified in Schedule VII corresponds to the largest number of SDG goals as compared to other CSR areas (SDGs 2, 6, 12, 13, 14, 15).
This therefore corresponds to the largest number of targets and associated indicators and hence provides the most comprehensive way to cross-referencing CSR in India to SDGs. Hence, adopting the design thinking mode and a participatory approach to sustainable development, ensuring environmental sustainability might perhaps be the best way to correlate inputs to outputs to outcomes and finally to impact measurement. The area of Indian CSR which presently receives the least attention and funds compared to the top 5 areas may thus prove to be an exemplar of aligning CSR in India to the global SDGs.
Finally, to coordinate the alignment of multiple SDG goals, targets and indicators to ensure environmental sustainability in India via its CSR spending, revitalising global and local partnerships for sustainable development which is SDG number 17 could be the best instrument.
Amit Lahiri is the Chief Sustainability Officer at O.P. Jindal Global University. He has developed the flagship graduate certificate program in International Business Management, and also the first course in Corporate Social Responsibility. He has graduate degrees in both natural and social sciences, and a Masters degree in the Life Sciences from Bombay University and Environmental Studies from York University, Canada. He has also participated in an Ontario Ministry of Education & Training-sponsored research project on integrating immigrants in the Canadian economy.
Views of the author are personal and do not necessarily represent the website’s views.
Thank you for reading the story until the very end. We appreciate the time you have given us. In addition, your thoughts and inputs will genuinely make a difference to us. Please do drop in a line and help us do better.
The CSR Journal Team

Monday, February 5, 2018

CSR to “Corporate Diplomacy”

CSR to “Corporate Diplomacy”

February 1, 2018, 3:43 PM IST  in In the name of 'Development' | India | TOI
There is an increasing shift from CSR to ‘Corporate Diplomacy’. The interplay of fame, influence and strategic control in the businesses come to the fore even as the managers employed by major corporations insist that they have “left the citadel” and joined an “Age of Conversation.”
The rise of corporate diplomacy does not signal the end of corporate social responsibility as anthropologists have come to understand it. Instead, corporate diplomacy both entrenches and makes more explicit the distinctly hierarchical social imagination that organizes extractive industry approaches to reputation and responsibility.
“Diplomacy is the business of handling a porcupine without disturbing its quills.” I love that quote because it suggests that diplomacy is about handling tough situations with tact and grace.
I understand that the “Corporate Diplomacy” focuses on the strategic choices that companies have to make in order to keep to their business agenda and retain credibility with their stakeholders and the world at large by managing conflict or by co-operation.
Multinational companies (MNCs) today are the most powerful actors in the global economy. We live in the times when the CEOs of international businesses are welcomed by heads of state as their counterparts, they are invited by governments to help solve global issues such as climate change and poverty, and they are facing dilemmas comparable to those of other international actors.
However, MNCs are facing global legitimacy challenges. They are suspected of tax avoidance, using low wage countries for corporate benefits only, disrespecting privacy regulations, abusing consumer data, violating local community rights, exploiting natural resources, ignoring basic human rights, and employing too many lobbyists targeting national and international political decision-making processes for their own corporate interests.
Although many of these challenges are not new, they have resurfaced and become more apparent during the past couple of years, partly due to the economic recession that many developed economies have faced and to the broader awareness of increasing global inequality and the importance of sustainability. Increased levels of transparency due to digitisation has faded more to this.
Businesses have carved out the way in terms of “strategic business diplomacy” – involving developing strategies for long-term, positive relationship building with governments, local communities, and interest groups, aiming to establish and sustain legitimacy and to mitigate the risks arising from all non-commercial or exogenous factors in the global business environment.
Business diplomacy is different from lobbying or strategic political activity; it implies an (strategic / holistic) approach of an international business to look at itself as an actor in the international diplomatic arena. Representation, communication and negotiation are key in such an approach.
How is CSR leveraged for “Corporate Diplomacy”?
In a survey carried out by IBM, it was found that 68% of the 250 business leaders worldwide use CSR as an opportunity and a platform for growth (Pohle & Hittner, 2008). In other words, businesses have adopted much more strategic view on CSR than philanthropy. Yet, gap exists between the intention and reality.
To be sustainable, businesses have already embraced a relatively new objective: optimising their operations to improve environmental and social outcomes in a manner that it enhances overall business performance. Businesses today are strategically transforming their corporate charities into development partnerships focusing on community development or improved stakeholder engagement.
In this era of digitisation and transparency, business couldn’t have found a better way to manage stakeholders’ expectations and ensure that their actions translate into good.
DISCLAIMER : Views expressed above are the author's own.

Budget 2018: Arun Jaitley seeks CSR funds for govt’s flagship health scheme

Arun Jaitley has invited corporate and philanthropic entities to invest funds into ‘health and wellness centres’, which shall be set up as part of the government’s flagship National Health Policy 2017

Monday, January 15, 2018

Between 2014-15 and November 2017: Govt funding for various development schemes was Rs 68,270 crore

Between 2014-15 and November 2017: Govt funding for various development schemes was Rs 68,270 crore

Uttar Pradesh, Tamil Nadu, Madhya Pradesh, Maharashtra and Gujarat are the biggest beneficiaries in terms of funds allocated for schemes such as Swachh Bharat Mission, Smart Cities Mission and PMAY (Urban)

Swachh Bharat Mission, Smart Cities Mission, PMAY, Narendra Modi, AMRUT, HriDay, government schemes, Government fundsThe details of key schemes and the financial support offered by states and the Centre under some of the flagship schemes are given below.(Illustration: C R Sasikumar)
For overall urban development across the country, the Central government has been supporting the states in improving governance, management and development of urban areas through schemes and missions such as Swachh Bharat Mission, Pradhan Mantri Awas Yojana (Urban), Smart Cities Mission, Atal Mission For Rejuvenation and Urban Transformation (AMRUT), National Heritage City Development and Augmentation Yojana (HRIDAY) and North Eastern Region Urban Development Programme (NERUDP). According to data from the Ministry of Housing and Urban Affairs, Rs 68,270 crore was released under these schemes across the country from 2014-15 till November 2017. Uttar Pradesh, Tamil Nadu, Madhya Pradesh, Maharashtra and Gujarat emerge as the biggest beneficiaries of the government funding. The details of key schemes and the financial support offered by states and the Centre under some of the flagship schemes are given below.
Swachh Bharat Mission
One of the flagship schemes of Prime Minister Narendra Modi, the Swachh Bharat Mission has seen about Rs 6,000 crore being pumped into the project since 2014-15 for construction of individual household toilets, community and public toilets, apart from solid waste management, information, education & communication and public awareness, and capacity building. The majority of the funds released are contributed by governments of respective states and Union territories. Initially, the project was funded by a 0.5 per cent Swachh Bharat cess, which was later abolished when the goods and services tax regime kicked in from July 1. Further, corporates also contribute to the Swachh Bharat Kosh as part of their corporate social responsibility (CSR):
# The total contribution to the Swachh Bharat Kosh as part of CSR expenditure as reported by the companies for the years 2014-15 and 2015-16, as per the filings up to March 31, 2017, was Rs 94.57 crore and Rs 321.03 crore, respectively.
# Among the various heads, the highest amount of funds has been allocated by the government on solid waste management. Of the total amount, Rs 2,394 crore has been released over the last four financial years for the purpose.
# This was followed by Rs 2,257 crore being released for construction of individual household toilets.
# In 2017-18 so far, Uttar Pradesh released the maximum funds under the Swachh Bharat Mission at Rs 354.13 crore, followed by Madhya Pradesh at Rs 291.87 crore, and Maharashtra at Rs 240.17 crore.
# While Madhya Pradesh and Maharashtra released the most money for solid waste management projects, Uttar Pradesh released the most for individual household toilets during 2017-18.
Pradhan Mantri Awas Yojana (Urban)
The scheme, launched in 2015, aims to provide assistance to states and Union territories in addressing housing requirement of the urban poor through four verticals – “in situ” slum redevelopment with participation of private developers; promotion of affordable housing for economically weaker sections through credit-linked subsidy; affordable housing in partnership with public and private sector; subsidy for beneficiary-led individual house construction or enhancement. Various projects under the mission are approved and implemented by governments of state or union territories or urban local bodies:
# In 2017-18 so far, the Centre released Rs 4,950.21 crore under the scheme, with maximum funds being released to Tamil Nadu at Rs 903.91 crore, followed by Madhya Pradesh at Rs 809.09 crore and Gujarat at Rs 480.58 crore.
# The trend was consistent in 2016-17, with Rs 4,606.26 crore being released. Tamil Nadu topped last year too, receiving Rs 634.60 crore in central assistance under the scheme, followed by Gujarat at Rs 614.05 crore, and Maharashtra at Rs 482.12 crore.
# However, in the first two years of the project, a combined Rs 3,131.98 crore was released to various states and Union territories.
# A total of 4,293 cities across states and union territories have been included under the Pradhan Mantri Awas Yojana (Urban)
Smart Cities Mission
The Smart Cities Mission aims to cover 100 cities in the country for improving infrastructure and services including smart solutions and area-based development. In the first year of implementation, i.e. 2015-16, 20 smart cities were selected and in the second year of implementation, i.e. 2016-17, 40 smart cities have been selected. The selection of smart cities follows a two-stage process where city administrations apply with their plans for receiving assistance under the mission. In the second stage of the project, 98 cities were shortlisted. Furthermore, 23 cities, including Lucknow, Warangal, Dharamshala, Chandigarh, Panaji, Port Blair, Raipur, among others, have participated in the fast-track round of the mission:
# Funds amounting to Rs 9,939.20 crore have been released in the three years — 2015-16, 2016-17 and 2017-18 — by the government for 100 smart cities.
# Cities such as Lucknow, Agartala, Coimbatore, Ajmer, Kota, Jaipur, Ludhiana, Bhubaneswar and Nagpur, among others, have so far received Rs 196 crore each in the past three years.
# In the list of 100 planned smart cities, Uttar Pradesh tops the list with 13 prospective smart cities, followed by Tamil Nadu at 12 cities, and Maharashtra with 10 cities.