Sec 135-Corporate Social Responsibility

Sec 135-Corporate Social Responsibility

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

Sec 135-Corporate Social Responsibility

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

Sec 135-Corporate Social Responsibility

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

Sec 135-Corporate Social Responsibility
  • 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 :

CSR Activities   
abolishing poverty,   malnourishment and hunger, improvising health care which includes preventive   health care and sanitation and making available safe drinking water   
improvement in education   which includes special education and employment strengthening vocation skills   among children, women, elderly and the differently abled and livelihood   enhancement projects   
improving gender equality,   setting up homes and hostels for women and orphans   
introducing the measures for   reducing inequalities faced by socially and economically backward groups   
Safeguarding environmental   sustainability, ecological balance, protection of flora and fauna, animal   welfare, agroforestry, conservation of natural resources and maintaining a   quality of soil, air and water which also includes a contribution for   rejuvenation of river Ganga   
protection of national   heritage, art and culture including restoration of buildings and sites of   historical importance and works of art; setting up public libraries;   promotion and development of traditional arts and handicrafts   
areas for the advantage of   skilled armed forces, war widows and their dependents   
training to stimulate rural   sports, nationally recognized sports, Paralympic sports and Olympic sports   
contribution to the Prime   Minister’s National Relief Fund or any other fund set up by the Central   Government for socio-economic development providing relief and welfare of the   Scheduled Castes, the Scheduled and backward classes, minorities and women   
contributions or funds   provided to technology incubators which are approved by the Central Government   
rural development projects   
disaster management,   including relief, rehabilitation and reconstruction activities   
slum area development where   ‘slum area’ shall mean any area declared as such by the Central Government or   any State Government or any other competent authority under any law for the   time being in force   

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.

Who is liable ?   
Rs. 50,000   
Rs. 25,00,000   
Rs. 50,000   
Rs. 5,00,000   
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