NGO Consultant

NGO Consultant
Odisha NGO Consultancy Services

Monday, October 27, 2014

Multinational corporations seek clarity on CSR legal norms

NEW DELHI: Multinational corporations operating in India have sought clarity on the corporate social responsibility norms, saying the inconsistency between theCompanies Act and the CSR rules has put them in a fix on whether they are legally bound to follow the norms on mandatory social spend.

These companies say while Section 135 of the Companies Act of 2013—which deals with corporate social responsibility or CSR—applies only to Indian companies, the CSR rules issued earlier this year to implement the section says oreign companies, their project offices and branches in India need to follow law. The Companies Act requires a company to spend 2% of its average net profit in the preceding three years on CSR if it has a turnover of Rs 1,000 crore or more, or net worth of Rs 500 crore or more, or net profit of Rs 5 crore or more.

"There's a lot of ambiguity whether CSR norms in the new Act are applicable to us or not," said a senior executive of a leading MNC operating in India's Infrastructure sector. "We, in any case, as a part of our global practice, do CSR in locations we operate in but are we bound to do it as per the law is yet to be clarified. We have raised the issue with the government."The Act says that its provisions will apply to "companies incorporated under this Act or under any previous company law".

But the CSR rules have expanded the reference to a "company" by including foreign firmshaving offices in India. "The rules seem to have gone beyond what was stated in the Act, by also including a foreign company having branch offices and project of-fices, although it does not fall into the definition of a company," said Sai Venkateshwaran, partner and head-accounting advisory services at KPMG in India.

Experts say, as per the law, foreign companies are not bound to follow CSR norms."It's a settled legal position that rules are supplementary and subservient to the provision of statute and cannot enlarge its scope. We're advising our foreign clients that legally the Act has to be followed not rules. The government needs to amend the law to get foreign firms in ambit of CSR norms," said Rakesh Nangia, managing partner at Nangia & Company.

Source: http://economictimes.indiatimes.com/news/company/corporate-trends/multinational-corporations-seek-clarity-on-csr-legal-norms/articleshow/44943103.cms