CSR Grant for New NGOs

Section 135 and sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013)

(References:- Ministry of Corporates Affairs Notification Dated on 22nd Jan-2021, and SATTVA.CO.IN)

An Overview:

In the present era, CSR (Corporate Social Responsibility) & Sustainability is a trending topic. More than 16000 companies are doing CSR activities in India. Apart from that, CSR is very successful and impactful in India.?Companies are spending crores of rupees on CSR & Sustainability and creating impact.

This clearly indicates that there is huge potential and opportunities for NGOs with the Corporates in the CSR domain. If you have the passion to create an impact on the society and environment then this article is very helpful for you.

And this article will also help you to understand the law and connect more CSR opportunities and to implement CSR projects & activities in a guided and effective way as CSR compliances are more important to the companies and CSR implementing agencies.

The Law States:

Under Section 135 of Companies Act-2013, companies having a net worth of Rs. 500 crores or more or turnover of Rs. 1000 crore or more or a net profit of Rs.?5 crores or more in a financial year need to spend at least 2% of the net profits of last 3 years for the company’s CSR policy and activities. And the law is amended from time to time which may create more opportunities for NGOs and other agencies.

Basics to be understood before diving into it:

It's very important to understand the processes and frameworks set by the law. Because anyhow companies are more aligned to the compliances. If you are aware then you are capable to approach in the right way.

(In the context of the Company)

1.????Administrative Overheads:

Expenses incurred by the company for ‘general management and administration of Corporate Social Responsibility functions in the company will be included in the CSR amount under the 5 % cap of the total amount of CSR fund. But shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or program. These will be included in the rest of 95 % of the CSR amount.

?2.????CSR Policy: CSR Policy to be redefined with respect to

• Clear Approach
• Direction
• CSR Objectives
• Guiding Principles of Selection, Implementation, and Monitoring of activities as well as Plan of Action.

3.????On-going Project:

• It is a multi-year project undertaken by the company to fulfillment of CSR obligations. An ongoing project can be extended over a maximum of 4 Financial Years including in which it was commenced.
• And it shall include such a project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the board based on reasonable justification.

4.????Executive Responsibility (CFO/CS):

?Funds so disbursed have been utilized for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect.

?5.????List of CSR Projects or Programmes:

?List of CSR projects or programs that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act.

?6.????Schedule VII of the Act:

?Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:—(i) Eradicating hunger, poverty, and malnutrition, promoting health care including preventive health care?and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.?(ii) Promoting education, including special education and employment enhancing vocation skills, especially among children, women, elderly, and the differently abled and livelihood enhancement projects.(iii) Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, daycare centers, and other facilities for senior citizens, and measures for reducing inequalities faced by socially and economically backward groups.(iv) Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources, and maintaining the quality of soil, air, and water?including contribution to the Clean Ganga Fund set up by the Central Government for rejuvenation of river Ganga.(v) Protection of national heritage, art, and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts;?(vi) Measures for the benefit of armed forces veterans, war widows and their dependents,?Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans, and their dependents including widows.(vii) Training to promote rural sports, nationally recognized sports, Paralympic sports, and Olympic sports.viii) Contribution to the Prime Minister’s National Relief Fund?or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund?(PM CARES Fund)]?or any other fund set up by the central govt. for socio-economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities, and women;(ix) (a) Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government or State Government or Public Sector Undertaking or any agency of the Central Government or State Government; and?(b) Contributions to public-funded Universities; Indian Institute of Technology (IITs); National Laboratories and autonomous bodies established under the Department of Atomic Energy (DAE); Department of Biotechnology (DBT); Department of Science and Technology (DST); Department of Pharmaceuticals; Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of Electronics and Information Technology and other bodies, namely Defense Research and Development Organization (DRDO); Indian Council of Agricultural Research (ICAR); Indian Council of Medical Research (ICMR) and Council of Scientific and Industrial Research (CSIR), engaged in conducting?research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).(x) Rural development projects(xi) Slum area development.Explanation.- For the purposes of this item, the term `slum area’ shall mean any area declared as such by the Central Government or any State Government, or any other competent authority under any law for the time being in force. (xii) Disaster management, including relief, rehabilitation, and reconstruction activities.

?7.????Activities Excluded:

Activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following:

• ?Activities are undertaken for the normal course of business of the company
• Activities are undertaken by the company outside of India (Except training of sports personnel representing Central or State Govt.)
• Contribution of any amount directly or indirectly to a Political Party
• Activities benefitting the Employees of the company
• Activities promoting marketing benefits for its products and services
• Activities carried out for the fulfillment of any other statutory obligations under any law in force in India

?8.????Surplus Amount:

?Any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be ploughed back into:

• ?The same project
• Or shall be transferred to the Unspent CSR Account
• Or transfer such surplus amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.

?9.????Excess Amount Set Off:

?Where a company spends an amount in excess of the requirement provided under sub-section (5) of section 135 i.e 2 % mandate CSR expenditure, such excess amount may be set off over the next 3 Financial Years.?Note:?(i) Any surplus arising out of the CSR Activities is not applicable.???????????(ii) Board needs to pass a resolution to that effect.

?10.??Acquisition of a Capital Asset:

?CSR amount may be spent by a company for the creation or acquisition of a capital asset, which shall be held by:

• ?A company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR Registration Number
• Community/Beneficiaries/SHGs
• A Public Authority

?11.????CSR Reporting:

• ?The Board’s Report of a company covered under these rules pertaining to any financial year shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable
• In the case of a foreign company, the balance sheet filed under clause (b) of sub-section (1) of section 381 of the Act, shall contain an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable

?12.???Impact Assessment:

?Impact Assessment by an independent agency is mandatory for companies having:

• ?An average CSR obligation of Rs. 10 Cr. or more in the three immediately preceding financial years
• This is for their CSR projects having outlays of Rs. 1 Cr. or more, and which have been completed not less than one year
• Assessment undertaken by the independent agency shall not cost Rs. 50 Lacs or 5 % of the CSR budget (Management & Admin cost of the company) whichever is lesser

?13.???Display of CSR activities on its website:

?The Board of Directors of the Company shall mandatorily disclose the following details on the company’s website for public access:

• Composition of the CSR Committee
• CSR Policy
• Projects approved by the Board
• Annual Report
• CSR Spends and Capital Assets
• Impact Assessment

?14.??Transfer of Unspent CSR Amount:

• Unspent funds for a particular financial year should be transferred to the “Unspent CSR Account” within 30 days of the end of the financial year
• The unsent amount should be spent within 3 years
• It must be spent on the project/activities mentioned in Schedule VII of the Act i.e PM Relief Fund, PM CARES, and Clean Ganga Fund

?(In the context of CSR Implementing Agency)

?1.????CSR Implementation:

The Board shall ensure that the CSR activities are undertaken by the company itself or through:

• A company established under section 8 of the Act, or a registered public trust or a registered society, registered under sections 12A and 80 G of the Income Tax Act, 1961
• The company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government
• Or any entity established under an Act of Parliament or a State legislature

Note: A company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and has an established track record of at least three years in undertaking similar activities.

2.???Form CSR-1:

• Every CSR Implementing Agency shall register itself with the Central Government by filing the form CSR-1 electronically with the Registrar, with effect from the?01st?day of April 2021.?A unique CSR Registration Number shall be generated by the system automatically
• Provided that the provisions of this sub-rule shall not affect the CSR projects or programmes approved prior to the?01st day of April 2021

3.????International Agencies:

An international agency means an organization notified by the Central Government as an international organization under section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), are permitted to be appointed by the companies for (Under 5 % of the Management and Admin cost):

• Designing of the Project
• Monitoring of the Project
• Evaluation of the Project
• Capacity Building of Own CSR Personnel??

Summary:

I hope, now you have understood the concept of CSR and CSR law in India. And this understanding will help you to connect more CSR opportunities and to implement CSR projects & activities in a guided and effective way.

If you are an NGO and looking for CSR grants then you have to be ready with the following compliances:

#1: NGO Registration (Society, Trust, or Section-Company)

#2: PAN Card of the Organizations

#3: 12 A & 80 G Certifications

#4: CSR-1 Registration

#5: Your Website and Social Media i.e LinkedIn & Facebook

#6: Profile & Credentials of the Organization

#7: Annual Reports

#8: Annual Audits

#9: Your Strategy to Start and Approach the Industry

#10: An effective Proposal/Concept Note to approach

It is also important to have a proper strategy to start and approach the industry. And surprisingly it is very simple. You can get it done within a few days.

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