Lok Sabha Question No. 1743 (UNSTARRED), answered on 2025-03-10
Subject: Influence of Large Corporate Houses on Policy Decisions
Ministry: CORPORATE AFFAIRS
Asked by: Shri K Radhakrishnan

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 1743 ANSWERED ON Monday, March10, 2024

Influence of Large Corporate Houses on Policy Decisions

1743. Shri K Radhakrishnan:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a)  the  measures  taken/being  taken  to  strengthen  corporate  governance and prevent fraud in large corporations, particularly in the light of recent financial scandals;
- (b) whether  the Government  is considering strict Corporate Social Responsibility  (CSR)  regulations  to  ensure  that  companies  contribute meaningfully to social welfare; and
- (c) if so, the details thereof?

## ANSWER

Minister of State in the Ministry of Corporate Affairs; Minister of State in the Ministry of Road Transport and Highways.

(Shri Harsh Malhotra)

(a):  The  Companies  Act,  2013  (Act)  and  Rules  made  thereunder  contain adequate provisions for strengthening corporate governance and transparency in the management of companies, including large corporations. It provides for accountability for management of companies through  key  managerial  personnel,  Board  of  directors  and  shareholders. The Act & Rules require companies to maintain books of account, various returns  and  registers  etc  in  the  prescribed  form  and  keep  them  at  their registered offices. Compliances with applicable accounting standards has also  been  mandated  under  the  Act.  The  companies  are  also  required  to forward notices for the general meetings along with explanatory statements  as  well  as  other  attachments  for  information  and  decision making by the shareholders. Annual financial statements are also required to be forwarded to shareholders. In addition, the companies are required to  file  various  documents,  copies  of  resolutions,  returns  etc  with  the Registrar. The  disclosures  in  the  Board's  report  including  on  risk management,  financial  statements  and  annual  returns  have  also  been mandated  to  ensure  that  every  relevant  information  is  available  to  the stakeholders  as  well  as  in  the  Registry.  Accordingly,  whenever  any irregularity  in  financials  of  the  Companies  is  reported,  regulatory  action under Companies Act, 2013 is taken. (b)  &  (c):  The  legal  framework  for  Corporate  Social  Responsibility  (CSR) has beenprovided through Section 135 of the Companies Act, 2013 ('Act'), Schedule VII ofthe Act and Companies (CSR Policy) Rules, 2014. Schedule VII of the Act indicatesthe eligible list of activities that can be undertaken by the companies as CSR. The CSR mandated companies can undertake any  of  the  activitiesmentioned  in  Schedule  VII  subject  to  fulfilment  of provisions  as  contained  in  theAct  and  Companies  (CSR  Policy)  Rules, 2014. Under  the  Act,  CSR  is  a  Board  driven  process  and  the  Board  of  the company isempowered to plan, decide, execute and monitor CSR activities based on therecommendations of its CSR Committee. The CSR framework is disclosure based andcompanies are required to file details of CSR activities annually in the MCA21  registry.The CSR mandated companies  are  required  to  provide  information  in  their  AnnualFinancial Statement regarding the amount of expenditure incurred on CSR activities.The Ministry has also notified the Companies (Auditor's Report) Order,  2020,  ("CARO,  2020")applicable  from  FY  2021-22  which  requires auditors to state details of  any  unspent  CSRamount. The details of CSR activities,  Impact Assessment etc. is to be reportedby the companies in the 'Annual Report on CSR' including an annual action plan on CSRwhich is part of the Company's Board Report. The Board's Report including Annual Reporton  CSR  is  an  important  tool  of  communication  by  the  Board  of  a company to itsshareholders. Further, those companies who have their websites are required to make disclosures suchas composition of CSR Committee, CSR Policy and CSR projects  approved  by  Board  ontheir  website  for  public  access  and transparency. Whenever any violation of CSR provisions is reported,that is dealt  as  per  provisions  of  the  Act  after  due  examination  of  records andfollowing due process of law.Thus, thecorporate governance framework  along  with  the  existing  legal  provisions  such  asmandatory disclosures, accountability of the CSR Committee and the Board, provisionsfor  statutory  audit  of  accounts  of  the  company,  filing  of  forms etc. provide adequatemechanism for effective use of CSR fund/activity and enhance transparency on the part of Companies.

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