How CSR Defines Normal Course of Business?‎

Dear Members

Greetings for the day!‎

May I invite comments on the clause for CSR ACTIVITIES as per CSR Rules 2014 para 4(1) under Sec 135 ‎of the Companies Act, 2013, “The CSR activities shall be undertaken by the company, as per its stated ‎CSR policy, as projects or programs or activities (either new or ongoing), excluding activities ‎undertaken in pursuance of its normal course of business.”‎

So a Sec 8 company/ foundation/ NPO of a Private Limited (Subsidiary of an International Company) if ‎has a common Key Management Personnel (KMP) as also the Foundation is directly promoting the main business of the Pvt Co which ‎is a “Tech partner” & sourcing the “products”, will this constitute a conflict of interest & violate the ‎above rule?‎

Best

Hardeep

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2 Responses to How CSR Defines Normal Course of Business?‎

  1. Subhash Mittal says:

    I would not like to comment on specific case quoted above, rather speak on what CSR Rules state for activities under normal course of business. Regarding the second para, there is no limitation on who the directors are. Hence if common directors are on both boards, they can still permissible. A company can also directly implement CSR programmes. In fact several companies do the same. A company could also promote its own NGO / S. 8 company, and that is allowed under the Rules. However if under CSR any activity is undertaken, which falls within the definition of ‘normal course of business’ than that is not allowed. In fact rules state the same at least at under 3 different rules, indicating the importance given to this clause by the Govt. However no definition has been given. Specific points mentioned in the query cannot be commented without details. As a general rule what NGO does as its other activities is not important, it should have 3 year’s track record and what gets charged to CSR should be spent on activities which are not in normal course.

    ICAI has come out with FAQs on CSR. These give some examples of what could be treated as ‘normal course of business’.
    – Electricity Distribution company connecting houses with electric connections cannot be treated as CSR, or
    – Tea plantation company planting trees & shrubs in close proximity of its planationa cannot be treated as CSR.

  2. G. C. Mathur says:

    Of course, it will be a case of “Conflict of Interest” and not in consonance with the spirit of Corporate Social Responsibility which in fact is a substitute of traditional Indian “Dharam Khaata” which was not managed by the men of the business family but by the ladies of the family. CSR should work as a substitute of Dharam Khaata under the Companies Act.

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