Understanding the Companies Act, 2013 - October 31, 2013

 
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Understanding the Companies Act, 2013 - October 31, 2013
Understanding the Companies
Act, 2013
October 31, 2013
Understanding the Companies Act, 2013 - October 31, 2013
Housekeeping

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Understanding the Companies Act, 2013 - October 31, 2013
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Understanding the Companies Act, 2013 - October 31, 2013
Agenda

1.   Introduction
2.   Kabir Kumar
3.   Dr. Bhaskar Chatterjee
4.   Pushpa Aman Singh
5.   Q&A

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Understanding the Companies Act, 2013 - October 31, 2013
Speakers

   Kabir Kumar         Dr. Bhaskar Chatterjee    Pushpa Aman Singh
   Silicon Valley          Indian Institute of     GuideStar India
Community Foundation       Corporate Affairs

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Understanding the Companies Act, 2013 - October 31, 2013
Evolution of Companies Act

          1956                          2013
• Definition of public and     • New types of companies
  private company                including one person
• Members and ownership          company
• Definition of nonprofit      • Increased guidance
  company                        around governance
• Registration guidelines      • New audit practices
                               • Emphasis on reporting

   Section 25 company              Section 8 company

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Understanding the Companies Act, 2013 - October 31, 2013
Overview of CSR Section

•   Eligible companies must spend 2% of average net
    profits on CSR activities

• A committee must be formed to oversee these
  mandated expenditures

• The committee develops a CSR policy which the
  Board signs

• CSR activities must be monitored and reported on

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Understanding the Companies Act, 2013 - October 31, 2013
Is My Company Eligible?

Net worth of    Turnover of Rs.   Net profit of Rs.
Rs. 500 crore     1,000 crore         5 crore
 (US$81M)         (US$162M)          (US$1M)

   Based on revenues generated in India

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Understanding the Companies Act, 2013 - October 31, 2013
Role of the Committee

Policy   Activities    Monitor   Report

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Understanding the Companies Act, 2013 - October 31, 2013
Eligible Activities/Expenditures

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Reporting Requirements

Effective beginning
                             Annual     CSR
FY14-15:                     Report    Report

• CSR must be included
  in annual report
  materials
• Publish CSR policy
  and report activities
  online

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Indian Institute of Corporate
Affairs
Dr. Bhaskar Chatterjee
Dr. Bhaskar Chatterjee
                           DG&CEO
Indian Institute of Corporate Affairs
Highlights of provisions of the
Companies Bill Relating to CSR
SECTION 135
1) Every company having a net worth of rupees five
   hundred crore or more (100 million $ or more),or a
   turnover of rupees one thousand crore or more (200
   million $ or more) , or a net profit of rupees five
   crore or more (1 million $ or more) during any
   financial year shall constitute a Corporate Social
   Responsibility Committee of the Board consisting of
   three or more directors, out of which at least one
   director shall be an independent director;
2) The Board's report shall disclose the composition of14
   the Corporate Social Responsibility Committee.
SECTION 135 {CONTD.}
3) The Corporate Social Responsibility Committee
  shall,
   a.   formulate and recommend to the Board, a
        Corporate Social Responsibility Policy which
        shall indicate the activities to be undertaken by
        the company as specified in Schedule VII;
   b. recommend the amount of expenditure to be
        incurred on the activities referred to in clause
        (a); and
   c.   monitor the Corporate Social Responsibility
        Policy of the company from time to time.   15
SECTION 135 {CONTD.}
4) The Board of every company referred to in sub-section
   (1) shall,
    a) After taking into account the recommendations
       made by the Corporate Social Responsibility
       Committee, approve the Corporate Social
       Responsibility Policy for the company and
       disclose the contents of such Policy in its report
       and also place it on the company's website, if
       any, in such manner as may be prescribed; and
    b) ensure that the activities as are included in
       Corporate Social Responsibility Policy of the
       company are undertaken by the company.       16

.
SECTION 135 {CONTD.}

5) The Board of every company referred to in sub-
  section (1), shall ensure that the company spends,
  in every financial year, at least two per cent of the
  average net profits of the company made during the
  three immediately preceding financial years, in
  pursuance of its Corporate Social Responsibility
  Policy.

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SECTION 135 {CONTD.}

Provided that the company shall give preference to
the local area and areas around it where it operates,
for spending the amount earmarked for Corporate
Social Responsibility activities;

Provided that if the company fails to spend such
amount, the Board shall, in its report made under
clause (o) of sub-section (3) of section 134, specify
the reasons for not spending the amount.

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Sub Section (8) of Section 134

If a company contravenes the provisions of this
 section, the company shall be punishable with
 fine which shall not be less than fifty thousand
 rupees but which may extend to twenty-five lakh
 rupees and every officer of the company who is
 in default shall be punishable with
 imprisonment for a term which may extend to
 three years or with fine which shall not be less
 than fifty thousand rupees but which may extend
 to five lakh rupees, or with both.
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What is CSR and what is not?
What is CSR?                           What is not CSR?

It should be rupee measurable;         That which is not rupee measurable is
                                       not a CSR activity;

It must bring direct benefits to If it does not benefits the poor &
marginalized , disadvantaged, poor or backward section of the community it is
deprived section of the community/ies; not a CSR activity;

It should not pre-dominantly benefit   Employee benefits will not count as
employees of the company;              CSR;

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What is CSR and what is not?
What is CSR?                                What is not CSR?

It can be related to the core business or   It must not be part of the core business
the business model. It can thus deliver     of the company;
shared value;

The quantum of value in monitoring The total value of the project itself
terms which the target group will derive cannot be shown as CSR;
must be shown and clearly identified;

It must be a sustained activity over a One-of or intermittent activities will not
period of time;                        count as CSR;
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What is CSR and what is not?
What is CSR?                            What is not CSR?
CSR activities must be in the form of Pure philanthropy or mere donations
projects/programmes. Thus CSR will not count as CSR
activities should be projectivized ;

Components of a project are as
follows:
•Need Based Assessment/Baseline
Survey/Study
•Clearly identified time frame
•Specific annual financial allocation
•Clearly identified milestones
•Clearly identified & measurable
objectives /goals
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•Robust & periodic review &
monitoring
What is CSR and what is not?
What is CSR?                        What is not CSR?
Programmes/projects must be within Programmes/projects        undertaken
India;                             outside India will not count as CSR;

It should be independent of Activities which are in compliance
compliances with any regulation or with any regulation or law will not
law;                               count as CSR;

Projects/programmes can be taken Projects from CSR activities should
up as social business projects.  not        be      shown         as
                                 commercial/business projects.

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GuideStar India
Pushpa Aman Singh
Are there enough NGOs in India

• 3.17 million NGOs counted by the
  Central Statistical Organisation
• Traced 694,000
• 55,000 unverified NGO records
  with the Planning Commission
• 22,735 NGOs filed returns for
  foreign contributions
• 4,200 registered on GuideStar
  India
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How to identify NGOs partners
  *No single registrar/ administrator of charities
  *No common accounting standards, reporting guidelines

• Organization Assessment
  •    Financial & legal compliance
  •    Transparency in public domain
  •    Accountability to public
  •    Good governance practices
• Program Assessment
  •    Track record (milestones accomplished)
  •    Who are current supporters
  •    Reference checks

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How you could engage NGOs
*Giving money is great, give it for high impact
*Give your in-kind resources & expertise: infrastructure, IT, managerial, mentoring,
employee volunteering

      •        Use intermediaries or co-fund
           •      Use existing data and credibility information
           •      Participate in NGO India conference &
                  exhibition
      •        Uplift Non profit practice
           •      Review quarterly/ six monthly
           •      Demand factual, verifiable public reporting
      •        Challenge status quo
           •      Bring your best practices
           •      Report on challenges and not just highlight
                  success stories
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Existing Resources

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What NGOs want
*308 NGOs responded to our mailer to give feedback on rules to the Act
*They attend every seminar on CSR to make sense of the “tamasha”

•       We have been working with the community
        all these years…
    •      Are we going to get any real support
    •      Every one wants projects,
           who will support organisation development
           for greater effectiveness
•       Why is our cause not important
    •      Care for the disabled, elderly
•       Every one wants a famous NGO,
           near the airport!
•       We seek partnerships not vendor contracts
•       Please do not waste our time!
•       Giving can be cool … enjoy the heat & dust!
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What you could do for great impact
*Giving money is great, give it for high impact
*Give your in-kind resources & expertise: infrastructure, IT, managerial, mentoring,
employee volunteering

•       Look for high impact projects
    •      Catering to underserved areas
    •      Leveraging government programs
•       Invest in the plumbing
    •      Capacity building of the sector
    •      Invest in philanthropy infrastructure
    •      Capacity building of grantees
•       Get Involved!

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Thank you!

Pushpa Aman Singh (pushpa@guidestarindia.org)
Founder & CEO
GuideStar India

Call +91-22-26856900 /98/ 99
Visit http://www.guidestarindia.org
Read http://guidestarindia.blogspot.com
Follow http://twitter.com/GuideStarIndia
Like http://www.facebook.com/guidestarindia

Also, visit our portal on giving to
India: http://www.indiagivingnetwork.org

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Q&A

   Kabir Kumar         Dr. Bhaskar Chatterjee    Pushpa Aman Singh
   Silicon Valley          Indian Institute of     GuideStar India
Community Foundation       Corporate Affairs

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How SVCF Can Help You

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Resources

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Contact Us

   India@siliconvalleycf.org

       +1.650.450.5444

siliconvalleycf.org/givingtoindia

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