Question) Will the contribution from the sale of the drink (alcoholic and non-alcoholic) be considered as a part of CSR spend of Company A under Companies Act, 2013? If not, which contributions by Company A can qualify as a CSR spending? Also, discuss the relevant legal framework which governs the CSR spending in India and the recommended path for the implementation of CSR schemes.
A leading listed alcohol manufacturing company (‘Company A’) has introduced a new type of drink with both alcoholic and non-alcoholic variants. The company has hired Rajesh as the new advertising executive entrusted with the purpose of selling the drink. Rajesh has attempted to sell the drink by undertaking a number of strategies which include:
(a) Setting it at a price below the cost price
(b) Targeting online advertising of the drink to potential customers based on their personally identifiable information
(c) Using celebrities to promote the non-alcoholic version of the drink which has the same brand name
(d) Providing a loyalty scheme to bulk buyers through which customers can earn points and collect gifts for the purchase of the drink
(e) Starting a mechanism under which customers can choose to add Rs. 10 to the price of each bottle of the drink (alcoholic and non-alcoholic) sold. This amount is then directly sent to an NGO for the education of the girl-child
Beyond the advertising blitzkrieg, Company A has released information in the media that their new launches will secure the number one position in the market which has led to an increase in the price of the company shares. While no actual verified information is available, they claim that their product has a superior taste to their competitors. The employees of Company A have also started selling off their shares in the company seeing this sudden increase in the price of the shares.
In addition to the employees, the top management of the Company A which has access to the projected sales figures has also started to sell its shares in the company due to the sudden surge in the share price.
Question) Will the contribution from the sale of the drink (alcoholic and non-alcoholic) be considered as a part of CSR spend of Company A under Companies Act, 2013? If not, which contributions by Company A can qualify as a CSR spending? Also, discuss the relevant legal framework which governs the CSR spending in India and the recommended path for the implementation of CSR schemes.
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