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1.  Section 135 of Companies Act, 2013 pertaining to Corporate Social Responsibility (CSR) is applicable to all Companies during the immediately preceding financial year having:

  • Net profit before tax of Rs. 5 Crore or more or
  • Networth of Rs. 500 Crore or more or
  • Turnover of Rs. 1,000 Crore or more

2. In this regard, the Board of Directors of such Companies shall mandatory:

  • Constitute a CSR Committee.
  • Have a CSR Policy for the Company.
  • Ensure that the Company spends, in every financial year atleast 2% of the Average Net Profits of the 3 immediately preceding financial years only in the CSR activities as prescribed under Schedule VII (CSR Rules)

Note:

  1. If the Company fails to spent such amounts, it shall transfer the unspent amounts to a fund as specified in the Schedule VII (CSR Rules) within 6 months from the end of financial year.
  2. In case of ongoing CSR project, any unspent amounts to be transferred to a separate bank account within 30 days from the end of financial year.
  • Such amounts to be spent within a period of 3 financial years from the date of such transfer.
  • Failing which, the company shall transfer the same to a fund as specified in the Schedule VII (CSR Rules) within 30 days from the end of the 3rd financial year.

Penalties for Non-compliance:

To the Company:

  • Fine not less than Rs. 50,000/- but which may extend to Rs. 25 lakhs

To every officer of the Company who is in default:

  •  Imprisonment for a term upto 3 years or
  • Fine not less than Rs. 50,000/- but which may extend to Rs. 5 lakhs, or with both.

Author: Rupesh Jain is an Associate at M&K Associates and can be reached at mail@mnklaws.com

Disclaimer: The views, information or opinions expressed herein are compiled by the Legal team of M&K Associates, Company Secretaries, Hyderabad. The above information is solely for disseminating knowledge and private circulation. We are hereby not liable for any loss, damage or inconvenience caused as a result of reliance on such information and we accept no legal liability or other responsibility by or on behalf of any errors, omissions, or statements on this content.

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