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Home | Monday, June 30, 2014 | 11:06:53 PM

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BLOGS/The Good
Company

NextGen
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5 Key
Takeaways
from the
Circular on
CSR Laws
06/25/2014 | 2 comments | 632 views


inShare53

+ Comment now
As was anticipated, the long-awaited
clarifications on the provisions of CSR
under Section 135 of the Companies
Act 2013 were released by the Ministry
of Corporate Affairs last week.
The General Circular came as a result
of stakeholders seeking clarity on
various aspects of the legislation,
majorly throwing light upon activities
that can qualify under the Act and
those that would not. Stated below is a
focused compilation of five key

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NextGen
NextGen is India's leading Sustainability and CSR
Management company, working with Fortune 500
clients across 16 sectors in 6 countries. NextGen
works across the value chain from strategy
development to on-ground implementation to
reporting and audit of CSR and Sustainability
initiatives. NextGen is also working closely with
Ministry of Corporate Affairs, Government of India
on the CSR ecosystem development as per Section-
135. NextGen was previously incubated at IIM-
Bangalore and BITS-Pilani.

NextGen is a consulting affiliate of the Shared Value
Initiative, a global community of practice to drive
adoption and implementation of shared value
strategies among leading companies, civil society,
and government organizations. The Initiative is
operated by FSG, a nonprofit consulting firm
specializing in strategy, evaluation, and research,
co-founded by Harvard Business School Professor
Michael E. Porter and Mark Kramer. Today, FSG
takeaways from the circular.
1. Be Liberal
The circular has portrayed Schedule
VII to be a list of broad items that are
to be interpreted liberally while
companies decide the areas of
intervention for CSR projects. The list
intends to help companies ensure that
the projects capture the essence
underlying the items. The approach in
interpreting the items can be
understood by exploring the projects,
including setting up of research,
training centres and techno-parks
either for the rural communities or the
masses; donations to IIMs for
conservation of buildings and
renovation of classrooms; promotion of
road safety awareness; provisions for
aids and appliances to the differently-
abled; trauma care around highways;
consumer protection activities;
engaging in ecological farm practices;
analyzing product life cycle to conserve
soil and renewable energy projects.
These can now be qualified as valid
CSR activities, according to the just-
released circular.
2. Inclusion of Employee Salaries
in CSR Expenditure
The big debate on the inclusion of
salaries of employees (who work in
CSR-related activities) as valid CSR
expenditure has been clarified in a
manner that has brought respite to
many companies, especially to the IT
sector. Salaries paid to regular CSR
staff and volunteers can now be
integrated into the costs of CSR
projects.
3. Non-Inclusion of One-Off CSR
Activities
CSR activities must be implemented in
a project/programme form to qualify
as CSR as per the Act. Hence,
investments in one-off activities like
works across sectors in every region of the world
partnering with corporations, foundations,
nonprofits, and governments to develop more
effective solutions to the worlds most challenging
issues. Learn more and join the community at
sharedvalue.org.
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NEXTGEN'S POPULAR POST(S)
5 Key Takeaways from the Circular on CSR
Laws
The Good Company
The Flag Off of CSR Rules: India Inc.s To-Do
List for Compliance to Section-135
The Good Company
New CSR Rules Explained
marathons/ awards/ charitable
contribution/ advertisement/TV
programmes will not qualify as CSR
since they cannot be structured in the
form of projects. Also, expenses
incurred by the company towards the
fulfillment of any Act/Regulation
would not be counted under the CSR
spend. This may include the outlay for
Labour Laws, Land Acquisition Act,
environment compliance laws and so
on.
4. Not Every Contribution to a
Section 8 Company is CSR
Following the debate on the
mushrooming of Section 8 companies
that could help channelize capital and
implement projects, it has been
clarified that contributions to the
corpus of a Trust/ Society / Section 8
company will qualify as CSR only if
they were created exclusively for CSR
projects and for a purpose that can be
directly related to a subject covered in
Schedule VII of the Act.
5. CSR for Foreign Holding
Companies
Expenditure incurred by a foreign
holding company for CSR activities in
India qualifies as the CSR spend of its
Indian subsidiary if, the CSR
expenditures are routed through these
subsidiaries (provided the Indian
subsidiary falls under the mandate of
Section 135 of the Act).
The circular also states that the
qualifying criteria for profits applies to
companies that have incurred profits
exceeding Rs 5 crore in any of the three
preceding financial years. These
clarifications have, to a large extent,
sorted out ambiguities and points of
contention that cropped up regarding
CSR rules. The widening of the scope of
CSR interventions presented by the
liberal interpretation Schedule VII of
The Good Company
Financial Inclusion and CSR
financial inclusion
Collective Impact: When Government,
Corporates and NGOs Collaborate
government
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the Act, which had been criticized for
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opens up a range of options for
companies to pick from, and giving way
to both strategic as well as purely
philanthropic CSR activities.
(By Monika Yadav, Elizabeth Mathew)
Tags: circular, Companies
Act, CSR, Section-135
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Surekha B June 26, 2014 at 6:04 pm
Also spending on consumer awareness needs
to be checked. The reason for companies to
be transparent is very strong.
Reply


Rahul Banerjee June 25, 2014 at 7:27 pm
Employee costs are included, its bonanza for
CSR professionals! Government should ask
companies to put a robust monitoring
mechanism so that companies don't misuse
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June 26, 2014 18:04 pm by Surekha B
Commented on 5 Key Takeaways from the Circular
on CSR Laws
Also spending on consumer awareness needs to be
checked. The reason for companies to be
transparent is very strong.

June 25, 2014 19:27 pm by Rahul Banerjee
Commented on 5 Key Takeaways from the Circular
on CSR Laws
Employee costs are included, its bonanza for CSR
professionals! Government should ask companies to
put a robust monitoring mechanism so that
companies don't misuse this!

this!
Reply

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