Supreme Group of Industries (SGI) has invested in diverse projects which impact the lives of people in many ways and create value by helping in overall and holistic development of communities across multiple geographies.
CS Professional · Strategic Management and Corporate Finance · PYQS · June 2024
Supreme Group of Industries (SGI) has invested in diverse projects which impact the lives of people in many ways and create value by helping in overall and holistic development of communities across multiple geographies. Through its various initiatives, the group endeavours to play a pivotal role in serving communities and projects which address the basic societal requirements. SGI has been involved in various Social Responsibility initiatives over last many years. These efforts have substantially improved the standard of living of the people through health care, education, livelihood and community development initiatives, making their living experience dramatically better. These activities impacting the lives of marginalized communities are spread across the globe reaching regions beyond SGI's business locations. The key philosophy of all CSR initiatives of SGI is guided by three core commitments of Social Responsibility Initiatives: (a) S – SCALE (b) I – IMPACT (c) S – SUSTAINABILITY For the fiscal year 2025, SGI seeks to strategically consolidate the company's CSR initiatives to focus on discrete social problems, all aimed at enabling lives, living and livelihoods of marginalized communities. SGI has identified the following focus areas: Community Infrastructure & Environment Community Health care Education and Skills enhancement With the endeavour to restructure its CSR initiatives, the Board of SGI in its recent board meeting, approved the following proposals: Formation of Corporate Social Responsibility & Governance (CSRG) committee to finalise the CSR policy in light of the Group's CSR plans for the fiscal year 2025. Appointment of a management consultant, to provide professional help to the CSRG committee on the factors influencing the proposed CSR initiatives of the group. Appointment of a practising company secretary, to advice on the role of board of directors with regards to the CSR related activities. Mrs. Meena, an executive director, who was a qualified management graduate from a premier management institute, shared the emerging significance of corporate governance with the Board members during the board meeting. All the directors were eager to assess its applicability to the SGI group in light of the new CSR initiatives proposed by the Board. Mr. Pratyush, the company secretary who was present at the board meeting, also enlightened the board on the emerging concept of corporate governance. Board asked Mr. Pratyush to table in the next Board meeting the objectives of corporate governance and the role of company secretary in light of corporate governance framework. Next day morning, Mr Pratyush came to his office and briefed his team on the expectations of the board from the corporate secretarial team and asked them to compile a note for the board on the objectives of corporate governance and the role of company secretary in the corporate governance. To aid them with the preparation of the note, he recapitulated his team on the recent developments of corporate governance framework. Based on the facts mentioned in the above case study: (b) Assume yourself as the Practising Company Secretary appointed by the Board and provide a write-up to the Board on their role in CSR related activities of the company, in light of the recent case law pertaining to Board's compliance responsibility of implementing and reporting.
Answer & Explanation:
A brief write-up on the role of Board of Directors in CSR related activities of the company: CSR is a Board-driven process. The responsibilities of the Board of a company which has a CSR mandate under the Companies Act, 2013, include the following: approve the CSR policy; disclose contents of such policy in its report and also place it on the company's website, if any; ensure that the activities included in the CSR policy are undertaken by the company; ensure that the 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; satisfy itself regarding the utilisation of the disbursed CSR funds; and if the company fails to spend at least two per cent of the average net profits of the company, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount and transfer the unspent CSR amount as per provisions of sections 135(5) and 135(6) of the Companies Act, 2013. alter such annual action plan based on reasonable justification as per recommendation of CSR committee. Apart from the above, the Board of Directors of the Company also has to take decisions on the following important matters related to CSR: Matters relating to monitoring of CSR projects - ongoing or otherwise Administrative Overheads Setting off excess amount Transfer of Capital Asset CSR Reporting Impact Assessment Report Disclosure on Website etc. Corporate Social Responsibility—Board's Compliance Responsibility of Implementing and Reporting—Case Law: In the matter of Chettinad Earth Movers (P.) Ltd. CA NO. 1096/CB/2018 NCLT Chennai , the Hon'ble court held that the Company and its Officers are in default have violated the provisions of Section 134(3)(o) read with Section 135 of the Companies Act, 2013, which is punishable under Section 134(8) of the Companies Act, 2013. The said offence is not intentional and it is not prejudicial to the interest of the shareholders or the creditors. The provisions of Section 134(8) of the Companies Act, 2013, provide that the Company shall be punishable with fine which shall not be less than fifty thousand rupees but which extend to twenty-five lakh rupees, and every officer of the Company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or with both. [This provision was amended vide Notification dated 28th September, 2020 by the Companies (Amendment) Act, 2020.] The applicant pleaded for taking a lenient view on the ground that it was the first offence, which has been confirmed by the concerned RoC. Therefore, the Application of the Company and its Officers in default is to be allowed and the offence is to be compounded in exercise of the powers conferred under section 441, by imposing a fine under section 134(8), to the tune of ₹ 1,50,000 i.e. ₹ 50,000 on each the Company, and its two Officers.
Topics: Corporate Social Responsibility
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