By: Aarti Kalra, Startup India 27 Nov 2019, Wednesday

Corporate Social Responsibility: Funding Incubators

Provisions of Companies Act

Section 135 of the Companies Act provides that “Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.”

The section further provides that a Corporate Social Responsibility Policy shall be devised by the CSR Committee indicating the activities to be undertaken by the company as specified in Schedule VII. The Board of the Company shall ensure that at least two percent of the average net profits of the company made during the three immediately preceding financial years, is spent as per the formulated Corporate Social Responsibility Policy. The company shall give greater preference to the local area and areas around where it operates.

Contributions to Incubators by Corporates

Old Provision: Schedule VII of the Companies Act covered contributions or funds provided to technology incubators located within academic institutions which are approved by the central government, as an activity that a Company may include in the scope of its CSR Policy.

New Provision: Contributing to technology incubators located within defined premises restricted extending any aid to other incubators which were engaged in promoting and supporting technology and innovations but were located outside the academic institutions. To increase the scope of CSR and increase access to funds for incubators, the Government recently announced to allow CSR 2% fund to be spent on incubators funded by the Central or State Government or any agency or Public Sector Undertaking of State or Central Government and making contributions to Indian Institute of Technology (IITs), National Laboratories and various Autonomous Bodies {supported by the Indian Council of Agricultural Research (ICAR), public funded Universities, Council of Scientific and Industrial Research (CSIR), Indian Council of Medical Research (ICMR), DAE, Department of Science and Technology (DST), Defence Research and Development Organisation (DRDO), Department of Biotechnology (DBT), Ministry of Electronics and Information Technology (MeitY)} engaged in conducting research in science, engineering, technology and medicine aimed at promoting Sustainable Development Goals (SDGs).


An incubator covered in any of the above categories is eligible to receive contributions from an eligible corporate as part of the corporate’s CSR Policy. This, however, does not entitle an incubatee, incubated at these incubators to receive contributions from the Corporate. The amendment is a welcome move by the Government for the supported incubators to have greater access to funds for upgradation and improved operations and for companies to contribute their funds towards building new businesses which are supported and handheld by these incubators. It will also enable the corporates to engage with startups and mentor and monitor the progress of those which can contribute to their strategic objectives.