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The Corporate Affairs Ministry will not be the “judge or jury” on CSR spending, and companies can take a call on how they want to use the funds, said Corporate Affairs Minister Sachin Pilot.
This should come as music to India Inc, given that the new company law prescribes a regime for corporate social responsibility (CSR) spending.
But the key issue now is how will the Corporate Affairs Ministry provide this relaxation in the CSR regime as it may require changes to the law.
“I am very clear that it cannot be the Ministry or the Secretary or the State Government that can tell you where you should spend the CSR money,” Pilot said at a CII-ITC sustainability awards 2013 event here. India Inc can spend the CSR money on environment, ecology or even wildlife if it so desires, he said.
CSR FRAMEWORK The CSR provisions in the new company law are yet to come into effect. The Corporate Affairs Ministry will by this month end come up with the final rules on CSR provisions, Pilot told Business Line on the sidelines of the event. The seven phases of draft rules on the new company law have seen tremendous response from stakeholders. The Corporate Affairs Ministry has apparently received more than 25,000 responses to the draft rules. The proposed final rules are expected to clear the air on CSR spends.
LEGAL POINT The Corporate Affairs Ministry has several options to change the prescriptive regime of CSR spending.
With the new company law in place, some legal experts feel that Schedule VII has to be amended if company boards are to get the power to decide on the areas of CSR spending.
According to the new company law, the CSR committee of a company will have to formulate and recommend to the board a policy. This policy will have to indicate what the company proposes to do from the Schedule VII list of 10 activities, including “such other matters as may be prescribed”. Indications are this phrase will be replaced with “such other activities that a company may deem fit”.
EXPERT VIEW Dolphy D’Souza, Senior Partner, S. R. Batliboi & Co, says it is possible to add to the list of CSR activities either by prescribing in the rules or by amending Schedule VII or using Section 470 of the Companies Act, 2013 to remove the difficulty. “I guess the rules will be an easy option,” he told Business Line .
Lalit Kumar, Partner with law firm J. Sagar Associates, said the Centre has under Schedule VII the powers to prescribe additional matters for CSR activities other than those already listed in the Schedule. But it has no powers to delete or amend the subjects already listed unless the Centre invokes its power under Section 467 of the Companies Act, 2013. This will, however, require approval of both Houses of Parliament.
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