Helping You Build Wealth With Honest Research
Since 1996. Read On...

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Revealed
India's Third Giant Leap

This Could be One of the Biggest Opportunities for Investors




Important: We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
By submitting your email address, you also sign up for Profit Hunter, a daily newsletter from Equitymaster
covering exciting investing ideas and opportunities in India.

AD

Is mandatory CSR good?
Fri, 21 Dec Pre-Open

After getting delayed for several years, the Companies Bill has been finally passed by the Parliament of India. The Bill brings the management of the corporate sector in line with global norms. It introduces concepts like responsible self-regulation with adequate disclosure and accountability, ushers in enhanced shareholders' participation and provides for a single forum to approve mergers and acquisitions.

The Companies Bill that has been passed by the Lok Sabha has many important features including those relating to independent directors and auditors. However, the most noteworthy and new feature of the Bill makes every corporate that meets certain criteria, liable to spend 2% of the average net profit of the last 3 years on Corporate Social Responsibility (CSR)activities or explain why it has not been done so. Such a provision probably does not exist in Companies Act of any major economy of the world.

However India Inc has expressed its concerns regarding mandatory CSR. Every company having a net worth of Rs 5 bn or turnover of Rs 10 bn has to constitute a "CSR Committee of the Board" consisting of at least 3 directors and out of these 3 directors, one has to be an independent director.

This is a foolproof provision ensuring that the committee is not just a quasi committee addressing the whims of the board but is in fact taking up an initiative. This provision has come in for some serious criticism. First, it has been said that this provision is very taxing. Adding another committee to an already complex set of requirements is not going to make life any easier for companies.

Secondly, there is no clarity on the taxation angle. Will this amount (invested towards CSR) be eligible for tax deduction?

The best criticism is that there were simpler ways to incentivize Companies to contribute to CSR than to add bureaucratic mechanisms like CSR Committees and mandatory CSR. A simple tax based incentive scheme might have worked much better.

Martin Luther King said that there was never a wrong time to do a right thing. As India Inc. is finally finding its feet, this is a classic case of the wrong thing being done at the wrong time.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Is mandatory CSR good?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited).

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.