Applicability of Corporate Social Responsibility

CS Shipra Joshi
| Company Law - Articles
17 Jan 2023
177,258 Views
3 comments

Introduction

Section 135 of Companies Act, 2013 provides for provisions regarding Corporate Social Responsibility (CSR) requirements for companies. Every company falling within the prescribed threshold of paid up capital and net profits is required to comply with the provisions of CSR stated under the abovementioned section.

Applicability

The CSR provisions are applicable to the following companies:

Every company, its holding company, its subsidiary company and foreign company having in the preceding financial year:

Net Worth > 500 Crore
Turnover > 1000 Crore
Net Profit > 5 Crore

Required Compliances

When section 135 are applicable on the companies, it has to comply with the following requirements –

CSR Committee: The Board of directors shall form a committee dedicated to CSR. The committee shall have minimum 3 directors of which one shall be an independent director. However, if the company is an unlisted public company or a private company (not required to appoint an independent director), it shall have two or more directors in its CSR Committee. In case of a foreign company, the CSR committee shall comprise of at least 2 persons of which one shall be a resident of India.

Where the amount to be spent by a company under these provisions does not exceed fifty lakh rupees, the requirement for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee, in such cases, be discharged by the Board of Directors of such company.

Reporting: The annual Board’s report shall disclose the composition of the Corporate Social Responsibility Committee. The foreign company shall contain an Annexure containing CSR report along with the balance sheet.

CSR Policy: The CSR committee shall formulate a policy stating the CSR activities that shall be taken by the company. The committee shall also monitor the policy and make amendments as per the requirement of the company. The policy shall elaborate the activities to be undertaken by the Company as stated under Schedule VII to the Companies Act. The CSR activities should be different from the activities of the companies done in its normal course of business.

CSR expenditure: The Board of every company to which CSR is applicable 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 or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

If the company spends an amount in excess of the requirements provided in a financial year, such company may set off such excess amount against the requirement to spend for three immediately succeeding financial years and in such manner, as prescribed under Companies Act, 2013.

Author Bio

Name: CS Shipra Joshi

Qualification: CS

My Published Posts

Dematerialized Securities to be issued by private companies

Due date of Annual Filing under Companies Act, 2023

Deadline Alert: Update Mutual Fund Folio Nominations by September 30

Artificial Intelligence and the Indian Legal and Judicial System

Taxability of Gifts under Income Tax Act, 1961

View More Published Posts

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Join us on Whatsapp

GROUP LINK

Join us on Telegram

GROUP LINK

Download our App

More Under Company Law

Understanding CSR Compliance: Companies Act, 2013

Resolution plan rejected u/s. 29A(c) as applicant managed and controlled corporate debtor: NCLAT Delhi

SBO- Identification of natural person behind Corporate Vehicles

Failure to File E-Form MGT-14 for Resolutions: MCS Reduces Penalty by 80%

Non-appointment of CS- MCA Reduces Penalty from ₹25 Lakh to ₹3.75 Lakh

« Previous Article
Next Article »

Applicability of Corporate Social Responsibility - Companies Act 2013 (2024)

FAQs

What are the applicability of CSR as per Companies Act, 2013? ›

Yes. If the company has not completed three financial years since its incorporation, but it satisfies any of the criteria mentioned in section 135(1), the CSR provisions including spending of at least two per cent of the average net profits made during immediately preceding financial year(s) are applicable.

Find Out More ›

How do I check my CSR applicability? ›

CSR Applicability in India

As per Section 135 of the Companies Act 2013, every company meeting certain criteria must constitute a CSR committee and undertake CSR activities. The criteria are as follows: Companies with a net worth of ₹ 500 crore or more, or. Companies with a turnover of ₹ 1,000 crore or more, or.

What are the CSR activities as per Schedule VII of Companies Act, 2013? ›

Schedule VII of the Act indicates the activities that can be undertaken as CSR which broadly relates to Health, sanitation, education, environment, sports, heritage, art and culture, rural development, slum area development, Disaster management, including relief, rehabilitation, and reconstruction activities, setting ...

Learn More Now ›

Do all companies have to have CSR? ›

Because corporate social responsibility is not compulsory, many companies might not feel the need to engage in it. However, there are several reasons I believe it is important for companies to prioritize social responsibility. CSR can help you attract and retain employees.