The document discusses the role of independent directors and corporate social responsibility (CSR) governance according to the Companies Act in India. It states that the Act requires companies to have an independent director on the CSR committee and sets criteria for who qualifies as an independent director. The CSR committee is responsible for formulating the CSR policy, recommending activities and expenditures, and monitoring implementation. The board approves the policy and ensures CSR activities are undertaken. Independent directors have duties to evaluate CSR performance and impact. The document outlines key elements of an effective CSR policy, implementation process, and performance management system according to the Act.

1. Role of Independent Directors

2. Companies Act - an overview
Putting in perspective
Independent directors
Setting perspective and priority – formulating policy
and framework
Setting M& E system

3. Companies Act - an overview
Putting in perspective
Independent directors
Setting perspective and priority – formulating policy
and framework
Setting M& E system

4. Applicability
•It will also apply to foreign companies registered in India
•Net profit will not include dividend income received from another Indian
company following the provisions of the companies law or from profits of its
own overseas branches

5. CSR Committee consisting of three or
more directors, out of which at least
one director shall be an independent
director
Unlisted public company or
private company can have a
committee without such an
independent director
A private company having only
two directors on its boards shall
constitute its committee with two
such directors
For foreign company, committee should have at least two persons
One: Resident in India authorized to accept on behalf of the company service of process and any notices or
other documents required to be served on the company
Other: nominated by the foreign company
CSR governance : CSR Committee

6. Role of CSR Committee and the board
Formulate and recommend a
CSR policy
Recommend activities and
amount of expenditure to be
incurred
Monitor the policy from time
to time
Constitute a CSR committee
Approve a CSR policy (indicating
the list of activities along with the
expenditure) & publish the same
in its report and on the website
Spend at least 2% of average net
profit during the three
immediately preceding financial
years. If not, specify the reasons
for not spending the amount
Ensure that the activities as are
included in CSR policy of the
company are undertaken by the
company
CSR CommitteeCSR Committee
BoardBoard

7. CSR policy

8. Targeting

9. Schedule VII

10. Schedule VII

11. Schedule VII

12. Budget allocation

13. Implementation

14. Disclosure
•Display CSR activities on the website
•Annual report on CSR

15. Disclosure

16. Reporting on CSR spend
CSR
project/activity
identified
Sector in
which the
project is
covered
Projects/
program
1) Local area
or other
2) State and
district of
the
project/progr
am
Project/
Program
wise
budget
(Amount
outlay)
Amount spent
on the
projects/progr
ams
Sub heads
1)Direct
expense
2) Overheads
Cumulative
expenditure
up to the
reporting
period
Amount
spent
direct or
through
impleme
ntation
agencies

17. Companies Act - an overview
Putting in perspective
Independent directors
Setting perspective and priority – formulating policy
and framework
Setting M& E system

18. Source: UNESCAP (United Nations Economic and Social Commission for Asia and the Pacific ) Publication
Business responsibility perspective

19. NVG perspective
Business
Responsibility
Business
Responsibility

20. Approaches for CSR Governance

21. Companies Act - an overview
Putting in perspective
Independent directors
Setting perspective and priority – formulating policy
and framework
Setting M& E system

22. Constitution of Board

23. Competencies of Independent Directors
No independent director shall hold office for more than two consecutive terms, but such independent
director shall be eligible for appointment after the expiration of three years of ceasing to become an
independent director

24. An independent director - neither himself nor any of his relatives is a Chief Executive or
director, by whatever name called, of any nonprofit organisation that receives twenty-five
per cent or more of its receipts from the company, any of its promoters, directors or its
holding, subsidiary or associate company or that holds two per cent or more of the total
voting power of the company; or who possesses such other qualifications as may be
prescribed

25. Role of CSR Committee and the board
Formulate and recommend a
CSR policy
Recommend activities and
amount of expenditure to be
incurred
Monitor the policy from time
to time
Constitute a CSR committee
Approve a CSR policy (indicating
the list of activities along with the
expenditure) & publish the same
in its report and on the website
Spend at least 2% of average net
profit during the three
immediately preceding financial
years. If not, specify the reasons
for not spending the amount
Ensure that the activities as are
included in CSR policy of the
company are undertaken by the
company
CSR CommitteeCSR Committee
BoardBoard

27. Duties of the independent director

28. Evaluation of independent directors

29. Companies Act - an overview
Putting in perspective
Independent directors
Setting perspective and priority – formulating policy
and framework
Setting M& E system

30. Basic policy elements as per the companies act

31. Companies Act - an overview
Putting in perspective
Independent directors
Setting perspective and priority – formulating policy
and framework
Setting M& E system

32. Performance management cycle

33. Source: Central government: Cost-effectiveness and improving annual reports,, Controller and Auditor General, New Zealand
Measuring performance and impact

34. Elements of M&E

35. For further clarification / guidance, email:
soumitra.ghosh@csopartners.org.in