Csr

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Querist : Anonymous

Querist : Anonymous (Querist)

08 July 2013 Dear sir,

Does the rule of forming a corporate social responsibility company apply to a clsely held company?

if yes, what if the company donot have the said committee?

Querist : Anonymous

Querist : Anonymous (Querist)

12 July 2013 is there no expert who could ans my query??

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

20 July 2024 Yes, the rules regarding Corporate Social Responsibility (CSR) apply to closely held companies as well, provided they meet the criteria specified under the Companies Act, 2013. Here are the key points to consider:

### Applicability of CSR Rules to Closely Held Companies:

1. **Threshold Criteria**: According to the Companies Act, 2013, CSR provisions apply to companies meeting any of the following criteria in the preceding financial year:
- A net worth of Rs. 500 crore or more,
- Turnover of Rs. 1,000 crore or more,
- Net profit of Rs. 5 crore or more.

If a closely held company meets any of these criteria, it is required to comply with CSR regulations.

2. **CSR Committee**: Every company meeting the CSR threshold is required to constitute a CSR Committee of the Board comprising at least three directors, including at least one independent director.

### Consequences of Non-Compliance:

If a company meeting the CSR criteria fails to constitute a CSR Committee or fulfill its CSR obligations, it may face consequences such as:

- **Penalties**: The company and every officer in default may be liable to pay a penalty as prescribed by the Act.

- **Reporting Requirements**: Non-compliance needs to be disclosed in the Board’s report and explained with reasons for such non-compliance.

### Recommendations:

If a closely held company meets the CSR criteria but does not have a CSR Committee:

- **Immediate Action**: The company should promptly constitute a CSR Committee as required under the law.

- **Consultation**: Seek guidance from legal or financial advisors to ensure compliance with CSR regulations and to understand specific obligations and timelines.

- **Disclosure**: Ensure proper disclosure in the Board’s report about the non-formation of the CSR Committee and the reasons thereof.

In summary, closely held companies falling under the CSR threshold criteria must adhere to CSR regulations, including the formation of a CSR Committee. Non-compliance can lead to penalties and mandatory disclosures. Therefore, it is essential for such companies to be proactive in complying with these statutory requirements.

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