06 December 2013
Whether it is mandatory to appoint an independent Director for a private limited Company for fulfill the Provision of Section 135.... Because we all know there is still no compulsory for Pvt Ltd to appoint Independent Director...
23 July 2025
### **Section 135 of the Companies Act, 2013 (CSR Provisions)**
**Section 135** of the **Companies Act, 2013** deals with **Corporate Social Responsibility (CSR)**. This section applies to certain categories of companies based on their financials and nature of operations. Let's break it down and address your query regarding the appointment of an **independent director**.
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### **Applicability of Section 135 (CSR Requirements)**
According to **Section 135(1)**, a company is required to comply with the CSR provisions if it satisfies any of the following conditions for the previous financial year:
1. **Net worth** of ₹500 Crore or more. 2. **Turnover** of ₹1,000 Crore or more. 3. **Net Profit** of ₹5 Crore or more.
### **Key Points Regarding CSR Compliance:**
* **CSR Committee**: A company meeting the criteria is required to constitute a **CSR Committee** of the board. * **CSR Policy**: The company must have a **CSR Policy** approved by the Board of Directors, which includes the activities undertaken, the framework for expenditure, and monitoring mechanisms. * **CSR Expenditure**: The company must spend at least **2% of the average net profit** of the last 3 years on CSR activities. If the company does not spend the required amount, it must justify the same in the Board's report.
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### **Independent Director Requirement for CSR Compliance:**
Now, regarding your specific question about whether it is mandatory for a **private limited company** to appoint an **independent director** for fulfilling the provisions of **Section 135**:
**1. CSR Committee Requirement:**
* As per **Section 135(1)**, a **CSR Committee** must be constituted for companies meeting the threshold for CSR spending. * However, there is no specific requirement that the CSR Committee must have an **independent director**. The committee can be composed of **Board members**, but **independent directors** are **not mandatory** for private companies.
**2. Independent Director Requirement:**
* The requirement for **independent directors** applies specifically to **public limited companies** that meet certain criteria (e.g., listed companies or large public companies). * For **private limited companies**, there is **no mandatory requirement** under **Section 135** for the appointment of **independent directors** for CSR compliance.
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### **Key Provisions of Section 135 Related to CSR Committees and Directors:**
* **Section 135(2)**: A **CSR Committee** must be formed, consisting of **three or more directors**, including at least **one independent director**. However, this requirement applies to **public companies** with the prescribed thresholds (₹500 crore, ₹1,000 crore, or ₹5 crore in net profit) and does not apply to private limited companies.
* **Section 135(3)**: If the company does not have an **independent director**, it should explain the reasons for this in the **Board's report**.
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### **Conclusion:**
* For a **private limited company**, there is **no requirement** to appoint an **independent director** specifically for CSR purposes under **Section 135**. * However, if the company is a **public company** with the prescribed CSR thresholds, it must appoint at least one **independent director** in the **CSR Committee**. * It’s important to note that a **CSR Committee** should still be formed, but the **independent director** is not a mandatory requirement for **private companies**.
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I hope this clears up the confusion. Let me know if you have any further questions!
CAclubindia
