Discuss the guidelines enumerated by the Companies Act 2013 for Corporate Social Responsibility.
The concept of Corporate Social Responsibility (CSR) in India is governed by Clause 135 of the Companies Act, 2013. The guidelines regarding applicability state that CSR provisions apply to companies with an annual turnover of 1,000 crore or more, a net worth of Rs. 500 crore or more, or a net profit of Rs. 5 crore or more.
The new rules, applicable from the fiscal year 2014-15 onwards, require qualifying companies to set up a CSR committee. This committee must consist of board members, including at least one independent director, to oversee the implementation of CSR initiatives.
The Act encourages companies to spend 2% of their average net profit from the previous three years on CSR activities. The indicative activities eligible for CSR are specified under Schedule VII of the Act.
Geographically, the guidelines specify that only CSR activities undertaken in India will be taken into consideration. Activities conducted outside the country do not qualify under these provisions.
Finally, the guidelines explicitly state that activities meant exclusively for employees and their families will not qualify as CSR. This ensures that the benefits of CSR extend to the wider community and society at large.
Explanation
The answer is derived directly from the provided context, specifically focusing on the provisions of Clause 135. It covers the eligibility criteria based on turnover, net worth, and profit. It details the structural requirement of forming a CSR committee with an independent director and the financial mandate of spending 2% of average net profit. Finally, it outlines the scope regarding Schedule VII activities, the geographical restriction to India, and the exclusion of employee-focused activities. The answer is structured into five paragraphs to meet the 5-mark requirement and uses bold text for key terms.