Corporate Social Responsibility (CSR) is the management concept. It simply emphasize the responsibility of companies to give back to the community. The basic purpose of CSR is that, if company is earning profits then it should give some consideration to the environment and provide social value.
Applicability of CSR
As per Section 135 (1) following companies in immediately preceding Financial Year:
> Having net-worth of Rs. 500 Crores or;
> Having turnover of Rs. 1000 Crores or;
> Having net profit of Rs. 5 Crores
shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director if Company has Independent Director on Board.
Independent Director will become part of the CSR Committee only if Company is required to appoint independent Director on Board as per Section 149 of the Companies Act, 2013.
Contribution to be made towards CSR
As per Sec 135 every company should ensure that the company spends, in every financial year, at least 2% percent 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.
Constitution of the CSR Committee
- Every company to which CSR criteria is applicable shall constitute a Corporate Social Responsibility of the Board (i.e. CSR Committee).
- Minimum number of directors CSR committee should has is 3 or more.
- Out of these 3 directors, at least 1 director must be an independent director.
- An unlisted public company or a private company shall have its CSR Committee without any independent director if an independent director is not required.
- In case of a foreign company, the CSR Committee shall comprise of at least 2 persons of which one person shall be a person resident in India authorized to accept on behalf of the foreign company – the services of notices and other documents. Also, the other person shall be nominated by the foreign company.
Duties of the CSR Committee
- The CSR Committee shall formulate and recommend a CSR policy to the Board. CSR policy shall point out the activities to be undertaken by the company as enumerated in Schedule VII.
- CSR Committee shall recommend the amount to be spend on the CSR activities to be undertaken by the company.
- CSR Committee shall monitor the CSR policy of the Company on timely basis.
- The committee shall establish the transparent controlling mechanism for the implementation of the CSR projects or programs or activities undertaken by the company
List of Permitted Activities To Be included in accordance with Schedule VII of the Companies Act, 2013
The Board shall ensure that the activities included by a company in its CSR Policy fall within the purview of the activities included is schedule VII. Some activities are specified in Schedule VII as the activities which may be included by companies in their Corporate Social Responsibility Policies. These activities are related to :
Fines and Penalties for Non-Compliance
In case a company fails to comply with the provisions relating to CSR u/s 135 then company will be punishable with a minimum fine of Rs 50,000 which may increase to Rs 25 lakh. Further, every officer of such company who defaults in the compliance will be liable for a punishment which is imprisonment for a term which may extend to three years or with a minimum fine of Rs 50,000 which may increase to Rs 5 lakh , or with both.