Provisions Applicable for Corporate Social Responsibility CSR

  • Corporate Social Responsibility (CSR) is introduced under the Companies Act 2013 under section 135.
  • Now every Company having net worth of Rs 500 crore or more, or turnover of Rs 1000 crore or more or a net profit of Rs 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of 3 or more Directors, out of which at least 1 Director shall be an Independent Director but a Company who is not required to appoint Independent Director and the private Company where there is only 2 director can constitute the committee with 2 Director.
  • The provisions of the CSR shall also be applicable to holding and subsidiary of Company who is required to incur CSR expenditure and also to branch or project office in India of a foreign company as per section 2(42), which fulfills the criteria specified in section 135(1).
  • The Board have to ensure that the Company spends, in financial year, at least 2% of average net profits of the Company made during 3 immediately preceding financial tears, in pursuance of its Corporate Social Responsibility Policy and in case of failure to do so, necessary reasons for not spending the amount, shall be disclosed in the Director’s Report ‘Net Profit’ for the purpose of this section and rules under shall mean, net profit of a company as per its financial statement prepared in accordance with applicable provisions of the Act but doesn’t includes the prescribed exclusions.
  • The Company shall while spending the amount earmarked for Corporate Social Responsibility activities give preference to the local area and areas around it where it operates.
  • Company will be required to undertake CSR activities as per its stated CSR Policy excluding the activities undertaken in pursuance of its normal course of business.
  • The Board of a Company may decide to undertake its CSR activities approved by the CSR Committee and such CSR activities may be run through a registered trust or a society registered under Indian Societies Act or a Company established i.e. a Company Registration under Companies Act or by the company or its holding or subsidiary associate Company i.e. Section 8 Company Registration in India. But if the above mentioned trust, society or Company is not established by the Company or its holding or subsidiary or associate company then the above mentioned trust or society or company must have an established track record of Three years in similar programs or projects and the Company should specify the projects or programs to be undertaken through these entities, the modalities of utilization of founds on such projects and programs and the monitoring and reporting mechanism.
  • Company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR committee of respective companies are in a position to report separately on such projects or programs.
  • Activities which are not exclusively for the benefit of employees of the company or their family members and the CSR projects or programs or activities undertaken in India only shall be considered as CSR activity.
  • Companies may build CSR activities of their personnel as well as those of their implementing agencies through institutions with established track record of at least 3 financial tear but such expenditure shall not exceed 5 percent of total CSR expenditure of the company in 1 financial year.
  • Contribution of any amount directly or indirectly to any political party shall not be considered as CSR activity.
  • The CSR Committee shall prepare a transparent monitoring mechanism for ensuring implementation of the projects / programmes / activities proposed to be undertaken by the company.

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