CORPORATE SOCIAL RESPONSIBILITY (CSR) LAWS
Corporate Social Responsibility (CSR) is the concept that businesses must support socially and sustainably significant subjects to communicate and do business with potential customers. CSR is termed as “Triple-Bottom-Line-Approach,” which refers to a strategy used by businesses to advance both their commercial goals and their obligations to society as a whole. Corporate Social Responsibility (CSR) encourages businesses to uphold moral principles by making contributions to the community, economy, and environment. CSR is responsible for boosting businesses’ goodwill with the public and supporting the development of their “brand value.”
The purpose of CSR regulations is to facilitate the charitable transfer of excess capital from the wealthy to the needy. To benefit society as a whole, this will enable corporations to engage in many more social, economic, and environmental projects. Additionally, this will enable corporations to actively participate in enhancing society and fundamentally shift from being seen as exploiters of trade to development drivers. They will have no choice but to make deeper contributions that will affect societal change at a far deeper level.
CSR became mandatory under The Companies Act, 2013, which succeeded The Companies Act, 1956. As per the notice of 27.2.2014, all companies, whether government or private, are required to participate in corporate social responsibility (CSR) under Section 135 of the new legislation, as long as they fulfill one or more of the following financial requirements:
- The net worth of the company should be Rupees 500 crores or more
- The annual turnover of the company should be Rupees 1000 crores or more
- Annual net profits of the company should be at least Rupees 5 crores.
The company must form a committee with at least three directors, one of whom should be an independent director, to enforce its CSR mandate if it satisfies any one of the three previously listed financial requirements.
Parliament enacted legislation stating that CSR expenses would not be deductible under Section 37 of the Income Tax Act due to their “philanthropic” nature and lack of being “wholly and exclusively” in the nature of business expenses.
The CSR regulations, which went into effect on April 1st, 2014, would apply to foreign corporate entities that conduct business in India, including holding companies and subsidiaries. According to Section 135 of the Companies Act, a foreign company’s CSR initiatives must be carried out through its Indian subsidiary in order to be accepted. The Companies Act of 2013’s Schedule VII provides a reasonably broad overview of CSR. The term is comprehensive since it covers the specific CSR initiatives mentioned in Schedule VII as well as additional social initiatives that aren’t on the list and whose classification as CSR initiatives is up to the business. It is mandatory for CSR reports to be released annually. The official CSR policy, the amount of funds allocated to CSR and its detailed utilization, as well as a thorough justification for any non-utilization of funds, are all required to be included in the reports’ prescribed format as per the CSR regulations. The company’s official website must feature the aforementioned format and all of its components.
In India, Corporate Social Responsibility (CSR) was enacted with the expectation that it would alter the mindset of business organizations, encouraging them to contribute significantly to society as it was society’s needs that had enabled their success in the first place. India’s CSR regulations and policies suffer from several fundamental issues, including inaccurate criteria for determining the amount of money spent, data manipulation, selective and self-serving CSR chores, and short-term financial spending. Thus, it is imperative that the CSR regulations be modified to make them more straightforward, long-lasting, and easy to enforce. With a few changes, CSR rules will benefit society much in the near future.
Sources:
- https://www.csr.gov.in/content/csr/global/master/home/aboutcsr/csr-legislation.html
- https://dpe.gov.in/sites/default/files/Guidelines_on_CSR_SUS_2014.pdf
- https://taxguru.in/company-law/corporate-social-responsibility-india-legal-framework-developments.html#:~:text=in%20this%20area.-,Legal%20Framework%20of%20CSR%20in%20India,financial%20years%20towards%20CSR%20activities.
- https://www.thehindubusinessline.com/business-laws/a-closer-look-at-csr-law/article33897046.ece
Author: Saumya Gupta, 2nd year law student at Symbiosis Law School, Hyderabad
