Corporate Social Responsibility Current Affairs - 2019
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High Level Committee (HLC) on Corporate Social Responsibility (CSR) constituted by Ministry of Corporate Affairs recommended making CSR expenditure tax deductible and to make compliance violations as a civil offence that attracts penalties. Corporate Affairs Secretary Injeti Srinivas presented the Report of the High Level Committee on CSR to Union Finance Minister Nirmala Sitharaman.
High Level Committee on CSR was constituted in October 2018 under Chairmanship of Secretary (Ministry of Corporate Affairs) to review existing CSR framework and make recommendations on strengthening CSR ecosystem, including implementation, monitoring and evaluation of outcomes.
Key Recommendations of Committee
Make CSR expenditure tax deductible.
Allow carry-forward of unspent balance for a period of 3-5 years.
Allow CSR in social benefit bonds.
Promote social impact companies.
Third party assessment of major CSR projects.
Align Schedule 7 of Companies Act (which outlines the kinds of activities that qualify as CSR) with United Nations Sustainable Development Goals (SDG).
Companies that have a CSR-prescribed amount less than Rs.50 lakh may be exempted from constituting a CSR Committee.
Violation of CSR compliance may be made a civil offence and shifted to penalty regime.
It also recommends registration of implementation agencies on Union Ministry of Corporate Affairs (MCA) portal.
Balancing priorities: Report recommends balancing local area preferences with national priorities when it comes to CSR. It also suggests introducing impact assessment studies for CSR obligations of Rs.5 crore or more.
Develop CSR exchange portal to connect contributors, beneficiaries and agencies.
Committee report emphasizes on not treating CSR as a means of resource gap funding for government schemes.
Tags: civil offence • Corporate Social Responsibility • CSR exchange portal • CSR expenditure • High-Level Committee
Parliament passed Companies (Amendment) Bill, 2019 aimed at tightening Corporate Social Responsibility (CSR) compliance and ensuring stricter action for non-compliance of the company law regulations. It amends the Companies Act, 2013. It was first passed by Lok Sabha on July 26, 2019 and then by Rajya Sabha by July 30, 2019.
Salient Features of Bill
- It aims to ensure greater accountability and better enforcement of the corporate governance norms.
- Corporate Social Responsibility (CSR): It brings key change related to CSR spending, wherein companies would have to mandatorily keep unspent money into a special account. The companies will have one year to firm up CSR proposal and another three years to spend funds. In case money remains unspent for one plus three years, then the money will have to be moved to an escrow account, could even be Prime Minister’s Relief Fund.
- Registrar of Companies (RoCs): It empowers RoC to initiate action for removal of name of a company from Register of Companies if it is not carrying on any business or operation in according with Company Law.
- Re-categorisation of 16 minor offences: It re-categories 16 out 81 compoundable offences mentioned in the parent Act as civil defaults, where adjudicating officers (appointed by the central government) may now levy penalties instead. These offences include: (i) failure to file annual return (ii) issuance of shares at a discount. Further, it also amends the penalties for some other offences.
- Change in approving authority: It shifts powers for conversion from public to private companies from National Companies Law Tribunal to central government.