Yes, Section 8 companies are eligible to receive CSR funding from companies required to spend on CSR activities. Compliance with CSR provisions ensures transparency and accountability in utilisation of funds.
Introduction
Corporate Social Responsibility (CSR) is an integral part of the business world today, with companies expected to contribute towards social and environmental causes. While CSR spending is mandatory for companies with a certain level of profits, there is often confusion regarding whether it is eligible to receive CSR funding. In this blog, we will explore whether Section 8 companies can get CSR and the provisions related to it.
What are Section 8 Companies?
It is a non-profit organisations registered under the Companies Act, 2013. The primary objective of this is to promote charitable activities such as education, health, environment, and social welfare. These companies are exempt from paying dividends to their shareholders, and their surplus is utilised for charitable purposes.
Can Section 8 Companies Get CSR?
Yes, It is eligible to receive CSR funding from companies that are required to spend on CSR activities. Under the Companies Act, 2013, companies with a net worth of ₹ 500 crore or more, or a turnover of ₹ 1000 crore or more, or a net profit of ₹ 5 crore or more are required to spend 2% of their average net profits of the preceding three years on CSR activities.
Provisions Related to CSR for Section 8 Companies
Eligibility Criteria
It is eligible to receive CSR funding from companies that are required to spend on CSR activities. However, the recipient company should have a valid registration under the Companies Act, 2013, and have completed at least three years of operations.
Utilisation of Funds
The funds received under CSR should be utilised for the charitable activities as specified in the CSR policy of the donor company. It can use these funds for various activities such as education, health, environment, and social welfare.
Registration Under FCRA
If the funds received by a Section 8 company under CSR are from a foreign source, then the company must register under the Foreign Contribution (Regulation) Act, 2010 (FCRA). The company must also ensure that the funds are used only for the purposes specified in the FCRA registration.
Reporting and Disclosure
It is receiving CSR funds are required to maintain a separate account of the funds received and the activities carried out using the funds. They must also submit an annual report to the donor company on the utilisation of the funds. In addition, It is required to disclose the details of the CSR funds received and the activities carried out using the funds in their annual financial statements.
Benefits of CSR Funding for Section 8 Companies
Increased Visibility and Credibility
CSR funding from reputed companies can help improve the visibility and credibility of Section 8 companies. It can help attract more donors, volunteers, and beneficiaries, thereby expanding the scope and impact of their charitable activities.
Diversification of Funding Sources
CSR funding can help Section 8 companies diversify their funding sources and reduce their dependence on individual donors and government grants. It can provide a stable and predictable source of funding, enabling them to plan and execute long-term projects.
Access to Expertise and Resources
Donor companies often have expertise and resources that can benefit Section 8 companies. CSR partnerships can provide access to technology, knowledge, and networks that can enhance the effectiveness and efficiency of their charitable activities.
Best Practices for Section 8 Companies in Receiving CSR Funding
Build Relationships with Donor Companies
Section 8 companies should focus on building long-term relationships with donor companies by communicating their mission, vision, and impact. They should leverage their networks to identify potential donor companies and proactively reach out to them.
Develop a Robust CSR Proposal
It should develop a comprehensive CSR proposal that outlines their charitable activities, expected outcomes, and impact. The proposal should be aligned with the donor company’s CSR priorities and objectives, and demonstrate the value of the partnership.
Ensure Transparency and Accountability
It is receiving CSR funds should maintain transparency and accountability in the utilisation of funds. They should maintain a separate account for CSR funds and provide regular reports to the donor company on the utilisation of funds and the impact of their charitable activities.
Conclusion
Vakilsearch, as a legal services provider, can assist Section 8 companies in understanding the provisions related to CSR and ensuring compliance. Vakilsearch’s team of legal experts can help Section 8 companies in registering under the FCRA, developing CSR proposals, and maintaining transparency and accountability in the utilisation of funds. Vakilsearch can also help Section 8 companies build relationships with donor companies and identify potential funding opportunities. With Vakilsearch’s support, It can receive CSR funding and carry out their charitable activities with ease, contributing towards a better society.
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