CSR, ESG & Charitable Institutions authored by Dr.
KS Ravichandran
Book review by Gaurav Pingle, Practising Company
Secretary
Along
with Related Party Transactions & Independent Directors, Corporate Social
Responsibility (CSR) has been one of the most deliberated concepts of the
Companies Act, 2013. Interestingly, CSR (section 135 of the Companies Act, 2013
and CSR Rules) is also one of the most amended provisions. The book (published
by Lexis Nexis) titled – CSR, ESG & Charitable Institutions,
authored by Dr. KS Ravichandran helps the readers in understanding the
concepts of CSR, Environmental, Social and Governance (ESG) reporting practices
and Charitable Institutions.
This
book provides 360-degree perspective of CSR. The author has explained the
concepts in very simple language, which would be very helpful for corporate law
professionals and students pursuing CS/CA/CMA course or students of law school
and management institutions. The discussion is not only about company law but
also, about foreign exchange laws, foreign contribution regulation law, income
tax law and accounting practices.
Philosophy
of CSR: Initially, the author has discussed in detail nine
principles that constitute the social responsibility of the company (as
provided in National Voluntary Guidelines on Social, Environmental and Economic
Responsibilities of Business). At necessary places, the author has given
reference to the practical application of the said principles. He has also
given practical and latest examples of unethical and undesirable corporate
practices (e.g. Volkswagen, Mitsubishi, Ranbaxy, Johnson & Johnson, etc.).
The author has also given references and details of the CSR initiatives at
Paris, CSR principles in Indonesia, OECD principles on CSR, etc. By reading the
first chapter, the reader gets a global outlook, ‘principle-based’ approach and
not just as compliance-oriented perspective.
ESG
reporting practices: After discussing the concept of ESG, the
author has presented a thorough study of ESG activities of top 50 listed companies.
This study will be helpful in understating the effectiveness of ESG in India.
The author has concluded this important chapter by stating that “it is
essential to note that the concept of business responsibility and
sustainability reporting, introduced by SEBI under the provisions of LODR
Regulations has brought much needed changes to bring a lot of thrust on the
significance of Socio-Enviro Governance”
CSR
& CSR expenditure: There is a detailed discussion on
the provisions of section 135 of the Companies Act and the CSR Rules made there
under. There is detailed analysis of the said provisions, accounting aspects,
accounting of CSR assets, grants received, disclosure in financial statements,
audit and action for fraud, falsification of books of accounts. This discussion
will help compliance officers, finance heads and accountants to understand and
apply the said provisions.
CSR
Vehicles: There are 3 separate chapters on CSR vehicles, which
covers section 8 companies, trusts and societies. There is detailed discussion
on grant of license to section 8 companies, grounds of revocation, corporate
restructuring in such entities, etc. There is also detailed discussion on establishment
of societies, registration requirements, procedural & administrative aspect
of societies, de facto doctrine & legal status of societies as not body
corporate. On the trust as CSR vehicle, after explaining the concepts of public
trusts and private trust, the author has discussed in detail provisions
relating to duties, authorities, general powers & rights of trustees, etc.
There is detailed discussion on other important concepts of trust law, which
becomes relevant when promoters of company / social entrepreneurs decide to set
up a trust for CSR activities.
Income
Tax aspect of CSR: In a separate chapter, the author has
also discussed the procedure and critical aspects of registration of trusts
under the Income Tax Act, 1961 and exemptions from income tax. There is also a
detailed discussion on section 12A of the Income Tax Act along with
registration procedure, factors considered by prescribed authority, conditions
for being entitled to exemption under section 11 and 12 of Income Tax Act. In a
separate chapter, the author explains the benefits of contributions to funds,
trusts and Institutions registered under section 80G of Income Tax Act. There
is clause by clause analysis of Section 80G of Income Tax Act. The author has also
analyzed in the detail the taxation aspects of CSR expenditure (under section
30 to 36 of Income Tax Act).
Foreign
contributions as CSR: There is a separate chapter and detailed
discussion on CSR vis-a-vis Foreign Contribution Regulation Act, 2010. There
section-wise commentary on the said Act. This will be helpful for the readers
who are connected with companies accepting foreign donations. There are
references to notifications issued by the Ministry of Home Affairs.
CSR
spend pattern analysis: The author has also presented a
study of CSR spend pattern analysis. Top 50 listed companies are considered by
the author for this study. The statistical analysis relates to applicability of
CSR provisions by average threshold, analysis of CSR required to be spent,
actually spent and unspent CSR in 3 financial years, amount spent on various
categories of CSR activities during last 3 FYs, amount spent on most preferred
and least preferred categories of CSR activities, CSR amount spent on funds
specified in Schedule VII in 3 FYs. The author has also presented detailed
statistics and analysis on amount spent directly and amount spent on CSR
activities through implementation agencies in 3 FYs. After every statistical
information and presentation, author has provided his analysis and views on the
same. There is detailed discussion on the findings of such research and
statistical information. This will be helpful for the Government agencies/
departments in further refining, amending and implementing CSR provisions
effectively.
In
the book, the author has also discussed 100 FAQs on CSR provisions. The answers
are not simply – yes or no. But there is a short discussion on the relevant
question and references to the provisions of the Companies Act, CSR Rules, MCA
Circulars, etc. The FAQs covers discussion on the critical questions w.r.t. CSR
applicability, spending, reporting, calculation of net profits, nature of
expenditure included and excluded in CSR spending, coverage of policy, CSR
activities vis-à-vis CSR policy, approval process, role of board of directors /
CSR committee, corporate restructuring and applicability of CSR provisions, etc.
All these questions are relevant and the replies / answers to the same are researched-based
and practical. Some of the important questions relates to: frequency of
meetings of CSR committee, whether systems required for monitoring CSR
expenditure, consequences of the failure to undertake CSR activities, including
at least one KMP as member of CSR committee, whether creating awareness
constitutes CSR activity, display of CSR activities on website, mandatory
requirement of 3 years track record, reference to various MCA Circulars in
relation to MCA notification dated January 22, 2021, etc.
For
the benefit of readers, the author has given a model memorandum of association
and articles of association of a section 8 company for undertaking CSR
activities and project report. There is also a model trust deed for undertaking
CSR activities.
The
overall deliberations in the book would be useful to professionals, directors,
officers, trustees, office bearers of NGOs, social entrepreneurs, academicians,
Government officers, law makers, students, etc. Every reader will get a
different and unique experience on CSR. In my view, every corporate law
professional and student must have this book for
having a global and broader perspective of CSR, ESG & Charitable
Institutions.
