All about CSR and recent amendment

SECTION 135:- CORPORATE SOCIAL RESPONSIBILITY {principal act}

Every company having a Net Worth of  Rs 500 crore or more; or

• Turnover of Rs 1000 crore or more; or
• Net Profit of Rs 5 crore or more,

during any financial year shall constitute a CSR Committee of Board consisting of 3 or more directors, out of which atleast one director should be independent director.

• The Board’s report shall disclose the composition of CSR committee.
• The CSR committee shall formulate and recommend to the Board a CSR Policy which shall indicate the activities to be undertaken by the company.
• Recommend the amount of expenditure to be incurred on the activities.
• Monitor CSR policy of company from time to time.
• The board of every company after taking into account the recommendations made by CSR committee, approve the policy and disclose contents of such policy in its report and also place it on company’s website.
• Ensure that the activities as are included in CSR Policy of company are undertaken by the company.

The board of every company shall ensure that the company spends in every financial year atleast 2% of the average net profits of the company made during the three immediately preceeding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceeding financial years in pursuance of its CSR Policy;

Provided that company shall give preference to the local areas and area around  it where it operates for spending the amount earmarked for CSR Policy.

Provided further that if the company fails to spend such amount, the board shall in its report specify the reason for not spending the amount and unless the unspent amount relates to any ongoing project, “transfer such unspent amount to a fund specified in Schedule VII, within a period of 6 months of the expiry of financial year.”

Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its CSR Policy, shall be transferred by the company within a period of thirty days from the end of financial year to a special account to be opened by the company in that behalf for the FY in any Scheduled bank to be called the Unspent CSR A/c or such amount shall be spent by the company within a period of three f.y. from the date of such transfer failing which the company shall transfer the same to a fund specified in Schedule VII within a period of 30 days from the date of completion of the third FY.  .

If a company contravenes the provision of sub-section(5)or(6), the company shall be punishable with a fine which shall not be less than 50000 or which may extend to 25 lakhs and every officer in default shall be punishable with imprisonment for a term which may extend to 3 yrs or with fine which shall not be less than 50000 or which may extend to 5 lakhs or both.

The CG may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of the provisions of this section.

AMENDMENTS: 2020

In sec.135,  sub-section (5), after the second proviso, the following proviso shall be inserted, namely:—

"Provided also that if the company spends an amount in excess of the requirements provided under this sub-section, such company may set off such excess amount against the requirement to  spend  under  this  sub-section  for such number of succeeding financial years and in such manner, as may be prescribed."

for sub-section (7), the following sub-section shall be substituted, namely:— "(7) If a company is in default in complying with the provisions of sub-section (5) or sub-section (6), the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.";

after sub-section (8), the following sub-section shall be inserted, namely:

(9) Where the amount to be spent by a company under sub-section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for the constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section  shall, in such cases, be discharged by the Board of  Directors of such company."