Asian Journal of Management

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Impact of the proposed Corporate Social Responsibility mandate in the new Companies Bill 2012 of India


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1 Department of Studies in Commerce, University of Mysore, Mysore, India
     

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Clause No.135 in the Companies Bill 2012 states that every company with a net worth of Rs 500 crore or an annual turnover of Rs 1,000 crore or a net profit of Rs 5 crore has to create a CSR committee, of which at least one board director must be independent. The company's board shall ensure that at least 2% of its annual average net profit made during the three preceding financial years is spent on CSR every financial year. If the company fails to spend such amount, the board shall specify the reasons for not spending the amount. However, the bill does not specify any penalty or legal implications for not adhering to the 2% CSR mandate. The enactment of a new legislation in 2013 could prove to be a turning point for Corporate Social Responsibility (CSR) activities in India. Most Indian private companies so for involved with short-term philanthropy activities will be obligated to focus on particular social theme and evolve a long term CSR strategy. This paper broadly attempts to provide an understanding of current CSR state of affairs in India and explores the possible future implications of the Companies Bill 2012 on the companies as well as the upon the philosophy of CSR in India.

Keywords

Corporate Social Responsibility, Business, Society, New Companies Bill
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  • Impact of the proposed Corporate Social Responsibility mandate in the new Companies Bill 2012 of India

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Authors

Truptha Shankar
Department of Studies in Commerce, University of Mysore, Mysore, India
H. Rajashekar
Department of Studies in Commerce, University of Mysore, Mysore, India

Abstract


Clause No.135 in the Companies Bill 2012 states that every company with a net worth of Rs 500 crore or an annual turnover of Rs 1,000 crore or a net profit of Rs 5 crore has to create a CSR committee, of which at least one board director must be independent. The company's board shall ensure that at least 2% of its annual average net profit made during the three preceding financial years is spent on CSR every financial year. If the company fails to spend such amount, the board shall specify the reasons for not spending the amount. However, the bill does not specify any penalty or legal implications for not adhering to the 2% CSR mandate. The enactment of a new legislation in 2013 could prove to be a turning point for Corporate Social Responsibility (CSR) activities in India. Most Indian private companies so for involved with short-term philanthropy activities will be obligated to focus on particular social theme and evolve a long term CSR strategy. This paper broadly attempts to provide an understanding of current CSR state of affairs in India and explores the possible future implications of the Companies Bill 2012 on the companies as well as the upon the philosophy of CSR in India.

Keywords


Corporate Social Responsibility, Business, Society, New Companies Bill

References