The Companies Act Amendment 2019

The Government of India has amended the Companies Act, 2013. The new Companies Act  Amendment bill 2019 was passed in both the Houses of Parliament, and past President's approval on the 31st of July, it became an Act within Section 135. 

Rules Till Now

·         Section 135(1): CSR rules mandate every company with a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, during any financial year has to constitute a CSR committee and has to spend 2% of the average net profit (PBT) over the last 3 financial years on certain CSR activities as mandated under Schedule VII of the Companies Act. It also states that every eligible company shall constitute CSR committee of the Board, consisting of 3 or more Directors, out of which at least one director shall be independent. 

·         Until now if the company failed to spend the stipulated amount, the Board members had to specify the reasons for not spending the amount in the CSR report.” Therefore, it was comply or explain. Under Section 135 (5): Board will have to spend at least 2% in every financial year. If not spent, they will have to report and specify the reasons for not spending the amount.

New Amendment - Section 135 (6)

·         After the amendment, every company is now entitled to explain the expenditure on CSR. If the amount is unspent during the one year window, the companies will have to transfer the money they fail to spend in that year to an “unspent Corporate Social Responsibility account”, from which they can draw within the next 3 years to spend on CSR activities. This transfer has to be done within 30 days of completion of the financial year, wherein the money was supposed to be spent. This special account has to be opened in a scheduled bank. If a company is still unable to spend the amount within that period of 3 years, it can transfer it to a govt fund specified in Schedule VII of the Companies Act, such as the PM's National Relief Fund, within a period of 30 days of the 3rd financial year-end, failing which fines and imprisonment clauses will be levied.

Fines and imprisonment clauses: Section 135 (7) 

·         The Amendment states that “if a company contravenes the provisions of sub-section (5) and (6) of Section 135, the Company shall be liable for fine, which is between Rs 50,000 to Rs 25 lakh. Officer of such company who is in default is liable for 3 years imprisonment or a fine between Rs 50,000 to Rs 5 lakh, or both.

About Fiinovation:-

Innovative Financial Advisors Pvt. Ltd. (Fiinovation) is a global consulting firm operating in multiple disciplines of the social development sector with emphasis on Corporate Social Responsibility (CSR) and Sustainability. Fiinovation offers end to end CSR consulting services and simplified solutions that has helped various corporations channelize their resources for the upliftment of community on societal, economic and ecological aspects in accordance to their CSR charter. Since 2008, Fiinovation has grown phenomenally and has made a benchmark in the sector through its service quality. It has been able to bridge the gap between businesses and communities through value-based CSR programmes in association with credible civil society organizations on pan India basis in the field of health, environment, education, and livelihood. 

MSMEs - The growth engine of India's Economy.

The Indian MSME sector is the backbone of the national economic structure and has unremittingly acted as a bulwark for the Indian economy. It has provided resilience to ward off global economic shocks and adversities. The development of this segment is extremely critical to meet the national imperatives of financial inclusion and generation of significant levels of employment in urban, and rural areas across the country. Further, it can nurture and support the development of new-age entrepreneurs who have the potential to create globally competitive businesses from India.

There are around 63.4 million units throughout the geographical expanse of the country, and nearly 20% of the MSMEs are based out in the rural areas, which indicates the deployment of significant rural workforce in the MSME sector and is an exhibit to the importance of these enterprises in promoting sustainable and inclusive development as well as generating large scale employment, especially in the rural areas. In spite of its contribution to the socio-economic growth of India, MSMEs face several challenges, such as inadequate access to finance and credit, poor infrastructure and utilities, lack of innovation, and inability to adopt the technology.

Creating a robust MSME Sector will require efforts towards strengthening the credit structure to help MSMEs amplify their operations. The absorption and upgradation of technology are critically important aspects of the MSME ecosystem. Considering this, centres that offer skill upgradation, consultancy and prototyping training of futuristic technologies such as IoT, artificial intelligence (AI), virtual reality and 3D printing among others must be initiated across the country. 

Further, various stakeholders like banks and financial institutions, industry sector majors and MNCs, trade associations, and regulators across ministries at the centre and state level etc, will have to join hands and create a forward-looking framework and ecosystem for the MSMEs. 

Data Speaks 

1.       SMEs contribute 6.11% of the manufacturing GDP, 24.63% of the GDP from service activities and 33.4% of India's manufacturing output.

2.       120 million people depend on India’s MSME sector to earn their livelihood. 

3.       MSME related products value 147,390.08 million dollars. 

4.       48% of India’s export comes from the MSME Sector.

How Corporate social responsibility intervention can sensitise the people on Water, Sanitation and Hygiene practices.

Water, sanitation and hygiene initiatives by Fiinovation

Water, health and sanitation has been a major concern in India for quite a long time. According to a report published in the Huffington Post, 3 infants die every 2 minutes in India due to lack of access to water and sanitation. In India, almost 26% of rural people live below the poverty line. Poor sanitation affects the health and overall development of the country. Women are the most affected by lack of proper sanitation. For example, in India, a large number of girls drop out because of the lack of separate toilets in the school for girls. Only 22% of them manage to complete class 10.

Various initiatives have been undertaken by the govt to achieve the goal of improving India’s sanitation and curb the problem associated with it. However, the goals require combined action and efforts from government, corporates and non-government organisations.

Despite making massive sanitation drives across the country, 50% of India still defecate in the open. The initiatives and cleanliness drive though seemed ambitious, there is an urgent need to involve Corporate Sector to promote WaSH components and sensitise people about WaSH practices. Corporates can implement WaSH component through CSR Initiatives in India. Corporates through their innovative ideas can plan CSR projects and implement WaSh Components among the poor and aware masses of the country. Corporates can reach to the interior parts of the country and benefit the people through their innovative approach.

In this regard, Fiinovation Company has partnered with People’s forum for a social intervention on Water, Sanitation and Hygiene (WaSH) components in Paradip, Odisha. The CSR Project intent to benefit around 700 households in the district by sensitising the locals on Water, Sanitation and Hygiene (WaSH) practises. The program will ensure access to safe drinking water by installing community Reverse Osmosis (RO) plants in the locality. The activities will include the installation of storage tanks for the collection and storage of the purified water. Every household will be enabled to collect 20 litres of safe drinking water each day through this initiative.

Fiinovation Team investigated the prior condition of the area and concluded that the local people faced immense problem in fetching safe drinking water due to the scarcity of resources. Through the project, Fiinovation intends to improve the quality of health care with access to clean water which is important to maintain good health. In addition, it also aims to create community-level awareness session on the prevention of waterborne disease and combating malnutrition by conducting frequent awareness drives and health camps.

In order to identify the key problem within the community, Team Fiinovation conducted a rigorous need assessment study which resulted in some important observations and essential requirements. Insufficient and unsafe drinking water was a major concern in the area. Due to the presence of many industries in the area, air and water pollution was a major issue in the region, resulting in respiratory and skin diseases. Non-availability of primary health care services added to the woes of the people. People’s forum realised the need to sensitize and create awareness amongst people and implement various initiatives listed in the project activities. As a part of the project, other activities like tree plantation in and around the colonies, school campus, playground and other suitable places, aimed to reduce the flow of pollutants has been initiated. Also, the existing Self Help groups have been employed to carry out the execution along with the NGO.

India can truly achieve the target and surge towards becoming a developed nation. All we need is a collective effort between all stakeholders, adequate funding and determination to achieve the goal.

------------------------------------------------------------------------------------------------------------------------------------------------------

6 criteria to be considered to select an effective CSR consulting firm from a list of CSR consultants in India?

A check list for Corporates to keep in mind while selecting the right CSR consultant will definitely help to understand and conduct the best CSR activities in India.

Here are the six criteria that are important.

1.      Work experience: One important aspect to keep in mind while selecting a CSR consultancy is the past record and work experience of the company. Have they worked for corporations and not-for-profit organizations? What kind of businesses have they worked with? A clear understanding of these is important while selecting the CSR consultant.

2.      Research Methodology: Understanding the method of research used by the identified CSR consultant is also important. Systematic study and analysis of collected evidence and data points with a linked and inclusive perspective to support the policy level decision making must be the speciality of the consultancy. It should be based on learning, analysis and should be action-oriented.

3.      Proper CSR-CSO partnership: A well captivated civil society organization with the required experience to implement the initiative must be given utmost priority by the consultants. Building a credible network of civil societies is crucial. A consultant must identify and select credible implementing partners with relevant experience for the programme and hold a command on community mobilization while also mitigating the risks when required.

4.      Understand your Social return on investment: Only having academic credentials and practical experience in business is not enough. CSR is all about bridging the gap between profit and purpose which means that the advisors must be capable enough to provide you an in-depth knowledge on how social change works. An efficient CSR consultancy helps the corporate identify how effectively the organization uses its capital and other resources to create value for the community.

5.      Diversity: Identifying the work scope and areas of work is equally crucial for a CSR consultant. One must understand that CSR consultants reflecting the internal and external audiences one needs to reach and influence. This means the consultant must have access to a wide range of different opinions and to people of different ages, genders, and culture.

6.      Building capacity: The best CSR consultant places itself to the highest degree of priority on putting themselves out of priority and concentrate on delivering outputs.

Regardless of which CSR consultancy a corporate opt for from a List of CSR Consultants in India, make sure the approach should be prolonged and should sustain momentum.

Fiinovation offers end to end CSR consulting services and simplified solutions that has helped various Corporations channelize their resources for the upliftment of community on societal, economical and ecological aspects in accordance to their CSR charter. Since 2009, Fiinovation has grown phenomenally and has made a bench mark in the sector through its service quality. It has been able to bridge the gap between businesses and communities through value based CSR programmes in association with credible civil society organizations on Pan India basis in the field of health, environment, education and livelihood.