SEBI Seeks Changes to CSR Rules to Include Donations

SEBI has proposed to the government to amend the Companies Act, 2013, to include donations made through social stock exchanges (SSEs) as part of CSR activities.

• Objective: The proposal aims to integrate SSE contributions into Corporate Social Responsibility (CSR) mandates under the Companies Act.

About Social Stock Exchanges (SSEs)

• Introduction:  It was Proposed by Finance Minister Nirmala Sitharaman in the FY20 budget.
• SSEs are platforms within stock exchanges where non-profit organizations focused on social welfare can list to raise funds.
• Operational Platforms: Both BSE and NSE operate social stock exchanges
• Current Listings: There are currently eight non-profit organizations listed on the NSE SSE, as stated by an NSE spokesperson.
• The minimum donation through SSEs is ₹50 lakh, as per a SEBI notice.
• Benefits 
  • SSES will give credibility and visibility to social enterprise
  • It will also help in increasing transparency and accountability in the social sector.
  • SSEs will allow donors to invest in social enterprises through zero coupon zero principal (ZCZP) securities. 
    • These securities will not provide any monetary returns, but they will allow donors to support the work of social enterprises.
  • SSEs will give donors more confidence that their donations are being used effectively.

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About Corporate Social Responsibility (CSR)

CSR is the idea that companies should evaluate and take responsibility for their impact on the environment and social welfare.

• • It promotes positive social and environmental change.
• Main Types of CSR:
  • Environmental Responsibility
  • Ethical Responsibility
  • Philanthropic Responsibility
  • Economic Responsibility
• Applicability under Companies Act 2013
  Criteria for Applicability: CSR provisions apply to companies with:
  • An annual turnover of ₹1,000 crore or more
  • A net worth of ₹500 crore or more
  • A net profit of ₹5 crore or more

Activities under CSR

Schedule VII of Companies Act 2013: Specifies major CSR activities, including:

• Eradicating hunger, poverty, and malnutrition; promoting education and gender equality.
• Combating AIDS, HIV, and other health disorders.
• Ensuring environmental sustainability.
• Protecting national heritage, art, and culture, including restoring historical buildings and sites.
• Supporting armed forces veterans, war widows, and their dependents.
• Training to promote rural sports, nationally recognized sports, paralympic sports, and Olympic sports.
• Contributing to the PM’s National Relief Fund or other central government funds for socio-economic development and relief.

What are the Current CSR Rules?

• CSR Spending Requirement: Companies must spend at least 2% of their average net profit over three years on social welfare activities listed in the Companies Act, 2013.
• Eligible Donations: Currently, companies can donate to non-profit organizations outside of SSEs under their CSR activities but cannot use SSEs for this purpose.

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