Indian Inc a worried lot on Mandatory CSR

The Budget Session of the Parliament begins on February 21 and with this date coming near, worries of the Indian Industry keep on increasing. Companies opposed to the government’s plans to make Corporate Social Responsibility (CSR) spend mandatory under the proposed Companies Bill 2009 , are desperately hoping to get some kind relief in terms of exemptions or riders in the rules which will follow the new Act.The Industry has already expresses its concern to the government on making CSR mandatory.

But Company Affairs Minister Murli Deora does not seem to be in a mood to relent. His views are quite clear as he says “If you ask me, my personal view is that CSR should be made mandatory,” he told reporters after meeting industry representatives from the chambers and other professional bodies.

Morevoer, the industry, though willing to adopt CSR, does not want the Government to supervise its implementation.And whether there would be penalisation for non-compliance of the proposed CSR is not clear as discussions are still on, say sources.

According to the draft Bill, the companies were expected to earmark two per cent of their net profits towards CSR activities every year. The law was meant to be applicable for all companies with a net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more. The third criteria was a net profit of Rs 5 crore or more. It is expected that the government may allow more flexibilities in this threshold.
Delegated legislation also becomes necessary as the Bill intends to allow scope for law making covering futuristic issues such as environmental pressures, impact of global operations of Indian firms on domestic stakeholders, technological collaborations, free movement of capital etc.
The key areas where Parliamentary panel wanted more clarity in the Act itself, include proportion and procedure for retirement of directors by rotation, computation of net profit, definition of small companies, manner of subscribing names in the memorandum of association, prescription of time to refund share application money, manner of conducting extraordinary general meeting, resolutions and agreements to be filed with registrar of companies, etc.
Till the time this bill is introduced and taken up in the Parliament, the Industry will be on tenterhooks regarding the final draft and outcome of the mandatory CSR.