Corporate Social Responsibility (CSR) 🌱

Definition: CSR = Companies' commitment to conduct business in an ethical and socially responsible manner.

Section 135 of Companies Act, 2013 makes CSR mandatory for certain companies.

India is the FIRST country in the world to mandate CSR spending by law!

Which Companies Must Do CSR? 🏢

Applicability (Any ONE of these):

1. Net Worth ≥ ₹500 Crores, OR
2. Turnover ≥ ₹1000 Crores, OR
3. Net Profit ≥ ₹5 Crores

(In any of the immediately preceding 3 financial years)

Examples: Reliance, Tata, Infosys, HDFC Bank - All must do CSR.

How Much to Spend? 💰

At least 2% of Average Net Profit of preceding 3 years.

Example:

• FY 2021: Profit = ₹100 Cr
• FY 2022: Profit = ₹150 Cr
• FY 2023: Profit = ₹200 Cr
• Average = (100+150+200)/3 = ₹150 Cr
• 2% of 150 Cr = ₹3 Cr (Must spend on CSR)

If Not Spent?

• Must explain why in Board Report (Comply or Explain).
• Unspent amount goes to PM Cares Fund or Schedule VII Fund.

What Activities are Covered? (Schedule VII) 📋

Allowed CSR Activities:

1. Eradicating Hunger & Poverty: Food programs, skill development.
2. Promoting Education: Schools, scholarships.
3. Healthcare: Hospitals, sanitation, safe drinking water.
4. Environment: Afforestation, animal welfare, conservation.
5. Sports: Promoting rural/national sports.
6. Heritage: Protecting monuments, art, culture.
7. Armed Forces: Welfare of veterans' families.
8. Slum Development: Housing, basic amenities.

NOT Allowed:

• Activities exclusively for employees.
• Outside India (with exceptions for Indian armed forces).
• Political donations.
• Sponsoring sports events for commercial purposes.

CSR Committee 👥

Every eligible company must form a CSR Committee with:

• At least 3 directors (one must be Independent Director).
• Functions:
  1. Formulate CSR Policy.
  2. Recommend CSR budget.
  3. Monitor implementation.

Punishment for Non-Compliance 🚫

• Company: Fine ₹50,000 to ₹25 Lakhs.
• Directors/Officers: Fine ₹50,000 to ₹5 Lakhs (or imprisonment up to 3 years for repeat offense).

Quiz Time! 🎯

💡 Final Wisdom: "Profit with purpose. Companies must give back to the society that made them successful!" 🌍

Next up: Corporate Governance - Rules of the game! ⚖️