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PRESENTATION ON THE COMPANIES ACT, 2013 CSR & PENALTIES. By DR. S.D. ISRANI, Advocate & Sr. Partner SD Israni Law Chambers ICAI Seminar at Kandivali, Mumbai on Sunday, 27 th April 2013. THE COMPANIES ACT, 2013.

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slide1

PRESENTATION ON

THE COMPANIES ACT, 2013

CSR & PENALTIES

By

DR. S.D. ISRANI, Advocate & Sr. Partner

SD Israni Law Chambers

ICAI Seminar at Kandivali, Mumbai

on

Sunday, 27th April 2013

slide2

THE COMPANIES ACT, 2013

Today’s business leader cannot justify his existence by profit statements alone. He must also render service to his local, national and world community.

  • DOROTHY SHAVER
slide3

THE COMPANIES ACT, 2013

COPORATE SOCIAL

RESPONSIBILITY (CSR)

slide4

THE COMPANIES ACT, 2013

CSR VOLUNTARY

GUIDELINES, 2009

slide5

THE COMPANIES ACT, 2013

Core Elements

  • Care for all Stakeholders
  • Ethical functioning
  • Respect for Workers' Rights and Welfare
  • Respect for Human Rights
  • Respect for Environment
  • Activities for Social and Inclusive Development
slide6

THE COMPANIES ACT, 2013

COMPANIES ACT, 2013

&

CSR

slide7

THE COMPANIES ACT, 2013

S. 135

  • Every company having net worth of Rs. 500 crores or more, or
  • Turnover of Rs. 1000 crores or more or
  • A net profit of Rs. 5 crores or more
  • During any financial year
slide8

THE COMPANIES ACT, 2013

To constitute a Corporate Social Responsibility (CSR) Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

Holding Co., Subsidiary Co., Foreign Co. having branch in India.

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THE COMPANIES ACT, 2013

The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

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THE COMPANIES ACT, 2013

The CSR Committee shall,—

  • (a) formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;
  • (b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and
  • (c) monitor the CSR Policy of the company from time to time.
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THE COMPANIES ACT, 2013

The Board shall,—

after taking into account the recommendations made by the CSR Committee, approve the CSR Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, in such manner as may be prescribed;

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THE COMPANIES ACT, 2013

The Board shall ensure that,—

  • the activities as are included in CSR Policy of the company are undertaken by the company.
  • company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its CSR Policy.
slide13

THE COMPANIES ACT, 2013

Schedule VII

CSR Activities

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THE COMPANIES ACT, 2013

  • (i) eradicating hunger, poverty and malnutrition, promoting preventive health care and 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.
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THE COMPANIES ACT, 2013

  • (iii) promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers, and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;
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THE COMPANIES ACT, 2013

  • (iv) ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintain quality of soil, air and water;
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THE COMPANIES ACT, 2013

  • (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 arts and handicrafts;
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THE COMPANIES ACT, 2013

  • (vi) measures for the benefit of armed forces veterans, war widows and their dependents;
  • (vii) training to promote rural sports, nationally recognized sports, paralympic sports and Olympic sports;
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THE COMPANIES ACT, 2013

  • (viii) contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women;
slide20

THE COMPANIES ACT, 2013

  • (ix) contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government;
  • (x) rural development projects
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THE COMPANIES ACT, 2013

  • Preference to the local area and areas around it where it operates, for spending the amount earmarked for CSR activities.
  • If the company fails to spend such amount, the Board to mention the dame in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.
slide22

THE COMPANIES ACT, 2013

IMPLEMENTATION

OF

CSR ACTIVITIES

slide23

THE COMPANIES ACT, 2013

TRANSPARENT MONITORING

MECHANISM

CSR REPORTING

ANNUAL REPORT

IN THE BOARD’S REPORT

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THE COMPANIES ACT, 2013

WHEN CAN A COMPANY BE EXEMPTED

FROM THE APPLICABILITY OF THE

PROVISIONS OF S.135

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THE COMPANIES ACT, 2013

The making of money, the accumulation of material power, is not all there is to living. Life is something more than these, and the man who misses this truth misses the greatest joy and satisfaction that can come into his life – service for others.

  • EDWARD W. BOK
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THE COMPANIES ACT, 2013

Offences And Penalties

slide27

THE COMPANIES ACT, 2013

Many fold Increase in Fine

More sections have minimum Fine provision

Fines range from Rs. 5000

to Rs. 25 crore and more

slide28

THE COMPANIES ACT, 2013

Cognisance of Offences

slide29

THE COMPANIES ACT, 2013

Section 439

Section 621 (Old)

slide30

THE COMPANIES ACT, 2013

Registrar

Shareholder

Person authorised by

the Central Government

SEBI

slide31

THE COMPANIES ACT, 2013

Composition of offences

slide32

THE COMPANIES ACT, 2013

Section 621A (Old)

Section 441 (New- NE)

Compounding of Offences

slide33

THE COMPANIES ACT, 2013

Compoundable Offences

slide34

THE COMPANIES ACT, 2013

Three kinds of offences

are permitted to be compounded

under the Act

slide35

THE COMPANIES ACT, 2013

Offences

which are punishable

with fine only

slide36

THE COMPANIES ACT, 2013

Offences which

are punishable

with imprisonment or

fine.

slide37

THE COMPANIES ACT, 2013

Offences

which are punishable with

imprisonment or

fine or

both

slide38

THE COMPANIES ACT, 2013

Non – Compoundable

An offence punishable with imprisonment only or

with imprisonment and fine

is not compoundable

slide39

THE COMPANIES ACT, 2013

CLB to compound offences without any limit

slide40

THE COMPANIES ACT, 2013

Fine Below Rs. 50000

may be compound by

Regional Director

slide41

THE COMPANIES ACT, 2013

Similar offence

committed within

a period

of three years

not compoundable.

slide42

THE COMPANIES ACT, 2013

Offences punishable with imprisonment or

fine or

both

prosecution

before the Magistrate

slide43

THE COMPANIES ACT, 2013

Effect of compounding

of an offence

slide44

THE COMPANIES ACT, 2013

no prosecution

can be launched

in relation to

such an offence.

slide45

THE COMPANIES ACT, 2013

prosecution is pending

shall be discharged

by the court.

slide46

THE COMPANIES ACT, 2013

Where the offences which can be compounded only with the permission of the court, the composition thereof shall have the effect of acquittal of the accused

slide47

THE COMPANIES ACT, 2013

Period of Limitation

slide48

THE COMPANIES ACT, 2013

S.468

Code of Criminal Procedure

Period of limitation

slide49

THE COMPANIES ACT, 2013

Six months

if the offence

is punishable

with fine only

slide50

THE COMPANIES ACT, 2013

One year

if the offence is

punishable with imprisonment for a term

not exceeding one year

slide51

THE COMPANIES ACT, 2013

Three years

if the offence is punishable with imprisonment

for a term exceeding one year

but not exceeding three years.

slide52

THE COMPANIES ACT, 2013

  • S. 8

Fine not less than ten lakh rupees may extend to one crore rupees and

Directors and every officer of the company who is in default punishable with imprisonment for a term which may extend to three years or with fine not less than twenty-five thousand rupees which may extend to twenty-five lakh rupees, or with both:

slide53

THE COMPANIES ACT, 2013

  • S.74 - Deposits

Fine not less than one crore rupees which may extend to ten crore rupees.

Every officer of the company who is in default punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both.

slide54

THE COMPANIES ACT, 2013

  • S. 41 Private Placement

Contravention of this section:

Company, its promoters and directors liable for a penalty which may extend to the amount involved in the offer or invitation or two crore rupees, whichever is higher, and the company shall also refund all monies to subscribers within a period of thirty days of the order imposing the penalty

slide55

THE COMPANIES ACT, 2013

S. 46 Issue of Duplicate Shares

Intent to defraud:

  • punishable with fine which shall not be less than five times the face value of the shares involved in the issue of the duplicate certificate, which may extend to ten times the face value of such shares or rupees ten crores whichever is higher
slide56

THE COMPANIES ACT, 2013

  • S. 195 Insider Trading

Any contravention punishable with imprisonment for a term upto five years or with fine which shall not be less than five lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher, or with both.

slide57

THE COMPANIES ACT, 2013

Presentation By:

S.D. ISRANI

Advocate & Senior Partner,

SD ISRANI LAW CHAMBERS,

911, Tulsiani Chambers,

Nariman Point,

Mumbai – 400021.

Ph: 22040117 /22810249

Email : sdi@isranilaw.com / sdisrani@gmail.com

Thank You