Notifications were issued for Section 135 and Schedule VII of the Companies Act today following a consultation on the draft rule issues last year. The rules will come into effect from 1st April 2014.
You can see a simple guide to all the rules here. But below we've outlined a few key changes to the draft version of the rules.
Putting capacity-building on the agenda
One noticeable addition is the provision for CSR funds to be spent on capacity building for both CSR teams, and beneficiary organisations. With the provisions that a) this cannot make up more than 5% of the spend, and b) that the organisation providing the capacity-building training has a track record of more than three years.
This is a great addition, and a much needed one. One the corporate side, the world of responsible business is still fairly new, and the concept of a dedicated CSR manager is very rare. Being able to invest in training these managers to behave strategically with funds, and think about creating advantage for the business is a long-term win for companies.
On the beneficiary’s side it’s even more critical – training NGOs to understand the language and priorities of the corporate world, as well as being able to manage “donor services” effectively will remove major stumbling blocks in the corporate-NGO relationship.
Schedule VII: additions
The full list of areas that CSR funds can be spent on is detailed in our one-stop guide, but there are some noticeable additions to the draft rules. The general theme is a broadening of the categories to include much more detail.
Healthcare: Preventative healthcare, sanitation and access to clean water all make an appearance - where previously only combating HIV and other “diseases” was mentioned. A great addition that broadens the scope to almost all healthcare – as well as sanitation which is set to be one of the most pressing issues of the 21st century.
Culture and sport: Both come out well, having been given their own categories. For culture the focus is on heritage and traditional craft, but there’s scope for other arts based projects too. For sport pretty much anything seems to go, all great news for our struggling non-cricketers.
Environment: The previous “ensuring environmental sustainability” has been extensive broadened to include protecting fauna, natural resources and soil quality.
The elderly: A new appearance for the elderly – old-age homes, day care centres and other facilities for senior citizens are all explicitly mentioned.
War veterans: Another completely new inclusion for any measures that “benefit” war veterans and their dependents.
Tech incubators: A strange inclusion (especially since the explicit link to “social business projects” has been removed) – this provision allows for funds to be donated to technology incubators within academic institutions that are approved by the government. It would be interesting to know the thought process behind this – yes, some of the most important technical innovations may come of out of these incubators (just as many won’t) but the vast majority won’t be contributors to social good in spirit or reality.