Corporate Social Responsibility (CSR)
1. Company Liable for CSR Section 135(1)
Company having –
a. Net worth of Rs.- 500 Cr. or More, or
b. Turnover of Rs. 1000 Cr. or More, or
c. Net Profit of Rs. 5 Cr. or More
during the immediately previous financial year
2. CSR Committee Section 135(1) and Rule 5 of the Companies (CSR Policy) Rules, 2014
1. The companies mentioned above shall constitute a CSR committee of the Board consisting of 2 or more directors, out of 1 director shall be independent director.
2. Company which is not required to appoint an Independent Director according to section 149(4) of the Act, shall have CRS Committee without independent Director.
3. A private company may constitute CSR committee with 2 directors.
4. In case foreign companies under these rules, the CSR Committee shall be comprise of at least 2 persons of which one person shall be as per section 380 of the Act and other person shall be nominated by the foreign company.
3. Disclosure under section 134 Section 135(2)
A Disclosure with respect to the CSR Committee shall be made by the company in its Board report under section 134 of the Companies Act, 2013
4. Functions of the CSR Committee Section 135(3)
1. Recommend to the board and formulate the CSR policy
2. Recommend the amount for the purpose of the CSR
3. Review and monitor time to time the CSR Policy
5. Function of the Board Section 135(4) and Rule 9 of Companies (CSR Policy) Rules, 2014
1. After recommendation by CSR committee, the Board shall approve the CSR Policy.
2. Make a disclosure in its Board report under section 134
3. Board shall place the CSR Policy on the website of the company, if any;
4. Board shall ensure that the activities which shall be under taken by the company shall be in the CSR Policy of the Company.
6. Min. expenditure on CSR Section 135(5)
1. Atleast 2% of average net profit of the company made during the last 3 immediately previous financial year;
2. In case company has not completed the 3 financial years since incorporation, so 2% shall be of the net profit of such immediately previous financial year.
*Note- Net profit shall be calculated in accordance with the provision of section 198 of the Companies Act, 2013
7. Case where company fails to spent such amount 2nd Proviso of section 135(5)
1. A report for the same shall be made by the board in its Board report under section 134;
2. Which shall contains the proper justification for not spending the amount on CSR activities.
3. Unless the unspent amount relates to any ongoing projects, transfer such unspent amount to the fund, within a period of 6 Months from the expiry of the Financial year.
8. Unspent CSR Account
Any amount unspent on any ongoing project undertaken by company in accordance of CSR Policy, shall be transferred by company within a period of 30 days from the end of the financial year to the unspent CSR Account and such amount shall be spent by company in accordance of its obligations towards in CSR Policy within a period of 3 financial year from the date of such transfer.
If company fails to spent such amount, the company shall transfer the same to the Investor Education and protection fund within a period of 30 days from the date of completion of the 3rd Financial Year.
9. CSR Activities Rule 4 of the Companies (CSR Policy) Rules, 2014
The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through-
1. Section 8 Company; or
2. Registered Trust; or
3. Registered Society; or
Established by Company itself or by CG, SG or entity established under Act of Parliament or a state legislature;
*Note: if, the Board of a company decides to undertake its CSR activities through a company established under section 8 of the Act or a registered trust or a registered society, other than those established by CG, SG or under any act of parliament or State legislature; such company or trust or society shall have an established track record of three years in undertaking similar programs or projects; and the company has specified the projects or programs to be undertaken, the modalities of utilisation of funds of such projects and programs and the monitoring and reporting mechanism”.
4. collaboration with other CSR activities in such a manner that the CSR Committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.
5. 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 in accordance with section 135 of the Act.
6. Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.
10. Action in case of contravention Section 135(7)
company shall be punishable with fine-
Min. fifty thousand rupees,
Max. twenty-five lakh rupees
every officer of such company
punishable with imprisonment- three years, or
Min. fifty thousand rupees,
Max. five lakh rupees, or
With both fine or imprisonment