Corporate Social Responsibility Under Companies Act, 2013

Applicability

As Per Section 135(1),  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(CSR) Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

Provided that where a company is not required to appoint an independent director under section 149(4) (i.e Number of Independent Directors), it shall have in its Corporate Social Responsibility Committee two or more directors

Duties and Responsibilty of Corporate Social Responsibility Committee

As Per Section 135(3), The Corporate Social Responsibility Committee shall,—
(a) formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII.
(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and
(c) monitor the CSR Policy of the company from time to time.

Duties and Responsibilty of Board of Director

The Board of every company Shall-
(a)  after taking into account the recommendations made by the CSR Committee, approve the CSR Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any,
(b) ensure that the activities  as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

Quantum Of CSR Expenditure

The Board of every company, shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

Other Point

  • The company shall give preference to the local area and areas around it where it operates, for spending he amount earmarked for Corporate Social Responsibility activities.
  • The Board’s report under Section 134(3) shall disclose the composition of the Corporate Social Responsibility Committee.
  • If the company fails to spend such amount, the Board shall, in its report made under Section 134(3)(o), specify the reasons for not spending the amount.
  • Every company including its holding or subsidiary, and a foreign company [Section 2(42)] having its branch office or project office in India, shall comply with the provisions of Section 135 of the Act.
  • Net worth, turnover or net profit. of a foreign company of the Act shall be computed in accordance with balance sheet and Profit and loss account of such company prepared in accordance .with the provisions of Section 381(1)(a) and Section 198 of the Act.
  • The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities
  • Contribution of any amount directly or indirectly to any political party under  shall not be considered as CSR activity.
  • A private company having only two directors on its Board shall constitute its CSR Committee with two such directors.
  • Refer SCHEDULE VII forActivities which may be included by companies in their CSR Policies Activities.
  • In case of Foreign Company, CSR Committee shall comprise of at least two persons of which one person shall be as specified under  Section 380(1)(d) of the Act and another person shall be nominated by the foreign company.

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