CSR Committee Rules

Under Section 135 of the Companies Act, 2013, companies operating in India must comply with Corporate Social Responsibility (CSR) provisions if they meet any of the following financial thresholds during the immediately preceding financial year:

1. Eligibility Criteria (Thresholds)

A company is required to constitute a CSR Committee and fulfill CSR obligations if it meets any one of the following conditions:

• Net Worth: ₹500 crore or more.

• Turnover: ₹1,000 crore or more.

• Net Profit: ₹5 crore or more.

2. CSR Committee Composition

If a company meets the above criteria, it must constitute a CSR Committee of the Board:

• General Requirement: Minimum of three directors, including at least one independent director.

• Relaxation for Certain Companies:

  • Companies not required to appoint an independent director: The committee must consist of two or more directors.

  • Private Companies: A minimum of two directors.

  • Foreign Companies: At least two persons, one of whom must be a person resident in India (as specified under Section 380) and another nominated by the foreign company.

• Exemption: If the CSR obligation does not exceed ₹50 lakh, the requirement to constitute a CSR Committee is not applicable, and the Board of Directors can perform the functions of the committee directly.

3. Key Obligations

• Expenditure: Eligible companies must spend at least 2% of their average net profits made during the three immediately preceding financial years on CSR activities.

• Policy & Monitoring: The committee is responsible for formulating the CSR policy, recommending the amount of expenditure, and monitoring the policy.

• Reporting: Companies must disclose their CSR policy and activities in the Board’s Report and on the company’s website.

Summary: CSR is mandatory for any company (public or private) with a net worth of ₹500cr+, turnover of ₹1,000cr+, or net profit of ₹5cr+ in the preceding financial year. These companies must spend 2% of their average net profits from the past three years on approved social activities.