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Government panel on CSR: no jail for violations

economy | Aug 13, 2019 9:26 PM IST

Government panel on CSR: no jail for violations

The high level committee on corporate social responsibility (CSR) submitted its report to Finance and Corporate Affairs minister Nirmala Sitharaman on Tuesday. The chairman of the committee and Corporate Affairs secretary, Injeti Srinivas, submitted the report highlighting the key recommendations for the consideration of the government.

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Confirming CNBC-TV18 newsbreak, the committee has recommended allowing carry forward the unspent CSR balance for 3-5 years and failing this, the amount will be transferred to a fund to be designated by the government to be spent on innovative, high impact projects.
What will come as a major relief for the corporate sector, the recommendations say that CSR noncompliance will have a penalty of maximum of Rs 1 crore, with no imprisonment.
Some other key suggestions include introducing impact assessment studies for CSR obligation of Rs 5 crore or more and registration of implementation agencies on MCA portal. Most importantly there is a suggestion to make expenditure a tax deductible expenditure as reported by CNBC-TV18 earlier.
“The Committee has made far reaching recommendations…The other recommendations include developing a CSR exchange portal to connect contributors, beneficiaries and agencies, allowing CSR in social benefit bonds, promoting social impact companies, and third party assessment of major CSR projects,” the ministry of corporate affairs said in a press release.
“The Committee has emphasised on not treating CSR as a means of resource gap funding for government schemes.  The Committee discourages passive contribution of CSR into different funds included in Schedule VII of the Act.  It has emphasized on CSR spending as a board driven process to provide innovative technology based solutions for social problems.  The Committee has also recommended that companies having CSR prescribed amount below Rs 50 lakh may be exempted from constituting a CSR Committee.  The Committee has also recommended that violation of CSR compliance may be made a civil offence and shifted to the penalty regime,” the MCA press release added.
The report also confirms that the committee has recommended having an annual CSR survey on the lines of Economic Survey to be prepared by Ministry of Corporate Affairs, expanding the scope of CSR to LLPs (limited liability partnerships), which are under the purview of MCA, to banks registered under Banking Regulation Act and to other similar entities not covered under the Companies Act.
The High Level Committee on CSR was constituted in October, 2018 under the Chairmanship of Secretary (Corporate Affairs) to review the existing CSR framework and make recommendations on strengthening the CSR ecosystem, including monitoring implementation and evaluation of outcomes.  The Members of the Committee included Sameer Sharma, DG & CEO, Indian Institute of Corporate Affairs, AK Mittal, former CMD, NBCC, N. Chandrasekaran, Chairman, Tata Sons, Amit Chandra, MD, Bain Capital Private Equity, B.S. Narasimha, former Addl. Solicitor General of India, Rajeev Luthra, Founder & MD, Luthra and Luthra Law Office, Shobana Kamineni,  Executive Vice Chairperson, Apollo,  Anil Gupta, Founder, Honey Bee Network and Professor, IIM, Ahmedabad, Narinder Dhruv Batra, President, Indian Olympic Association, S. Santhanakrishnan. Chartered Accountant, and Mathew Cherian, CEO, Helpage India.  Gyaneshwar Kumar Singh, Joint Secretary, Ministry of Corporate Affairs, who was the member and convener.
Some of the other recommendations made by the committee include:
  1. A clarification should be issues for the newly incorporated companies under Sec 135 only after they have been in existence for 3 years
  2. Relaxation for Companies with less than Rs 50 lakh of CSR fund from forming a dedicated CSR committee to the powers going to the board.
  3. Proposes to have a regulatory oversight on CSR spend used for creation of capital assets. Cos should be encouraged to forge partnerships when they are creating assets for public, the ownership will be with the public but the company may act as a custodian to operate and make it self-sustainable
  4. Engaging with international partners on designing CSR projects
  5. Bringing in comprehensive guidelines for CSR of CPSUs in consultations with Dept of public enterprises
  6. Making National Foundation for CSR (Incorporated in 2012), the think tank for CSR, Govt may consider infusing seed money of 10 crore to build network and capacity
  7. To have a facility of social impact bonds to be raised by social impact companies or not for profit companies to bring in upfront risk capital on a pilot basis
  8. CSR should be brought under the purview of statutory financial audit, by making it a part of the financial statements
  9. Monitoring CSR through enhanced disclosures
  10. Advising cos to engage in CSR activities by balancing local area preferences with national priorities, spend can be made in sports, for welfare of senior citizens, differently able etc.
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