CORPORATE SOCIAL RESPONSIBILITY ("CSR")

The government has sanctioned prosecution proceedings against 284 companies and sent 5,382 notices to companies that have not fulfilled the mandatory corporate social responsibility (CSR) expenditure norms, minister of state for corporate affairs P P Chaudhary has said. Link Dated 19-12-2018. [1]The Notices issued in respect of Non-compliance pertains to the FY 2015-16. The MCA recently set up a Centralized Scrutiny and Prosecution Mechanism (CSPM) to keep a tab on the firms and also to examine the records of the companies obliged to spend on CSR activities.

These actions are taken on the basis of Baijal Committee Report: Link. Some of the recommendations and issues which may arise in near future are as follows:

1. It seems that a one-off event shall not be counted as CSR activities such as charitable contribution [except Contributions mentioned in Schedule VII]. There have to be some projects which is run on continuous basis.


2. As per Report of 2015 on the implementation of CSR, Ministry intended to introduce sunset clause of five year after which the unspent amount shall be transferred to one of the funds listed in Schedule VII.

3. It is expected to introduce a social audit of CSR projects.

4. The lenient approach in the initial 3 years was recommended, but now Ministry starts playing regulatory role; sending Notices could be one of stances. And they pointed that various reasons for non-compliance or non-spending the CSR amount are in the nature of excuses.

5. On interpretation part of the provisions which corporate initially envisaged as non-mandatory, the report specifically mentions mandatory.

6. Some anomaly observed in terms of accounting of CSR provisions. [Page 15] and same clarified by the FAQs.

7. “Centralized Scrutiny and Persecution Mechanism (CSPM)” is established to send the scrutiny notices. 

Compliance:

8. Disclosure of CSR policy on the website of the company. [Rule 9] 

Penal Provision:

9. ROC may initiate action u/s 206s








[1] https://www.dnaindia.com/business/report-over-5000-firms-get-notices-for-csr-non-compliance-2696860

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