Corporate Social Responsibility by SONAM NARAYAN

As per section 135 of the Companies Act, the provision for Corporate Social Responsibility is given. It says that every company having a net worth of rupees five hundred crores or more, or turnover of rupees one thousand crores or more or a net profit of rupees five crores or more during immediately preceding financial year 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. CSR helps the company in any manner like it helps the company to make a good brand name and where the companies are making their name for their competition their they gain the name for the social work which makes them stand out.  The Corporate Social Responsibility Committee shall,—
(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company 5[in areas or subject, specified in Schedule VII];
(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and
(c) monitor the Corporate Social Responsibility Policy of the company from time to time. As per section 135 of the 2013 Act, Corporate Social Responsibility (CSR) committees were required to be constituted mandatorily on fulfillment of certain thresholds concerning profits, net worth, and turnover. However, the Act has exempted companies that undertake CSR expenditure of up to 50 Lakhs, from the requirement of constituting a CSR Committee.

“CSR Policy” means a statement containing the approach and direction given by the board of a company, as per recommendations of its CSR Committee, for selection, implementation, and monitoring of activities to be undertaken in areas or subjects specified in Schedule VII of the Act.”This virtually covers the provisions of Rule 6 which has been omitted. However, Rule 6(2) which has been omitted which reads as The CSR policy of the Company shall specify that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profits of the Company.

CSR policy is mainly the action plan on the basis of which the company aims to work so that it can achieve its objective.  If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees, and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees as per the section 134 of the Companies Act.

Once a company is covered under the ambit of the CSR, it shall be required to comply with the provisions of the CSR -Section 135(1), required to do the following activities

  1. Constitute CSR Committee
  2. Board’s report shall disclose the compositions of the CSR Committee

The composition of the committee and the board’s report are the two most essential things to be done. Salary paid by the companies to regular CSR staff as well as employees, who render their services for CSR will be part of Administrative overheads and should not exceed 5% of the total CSR expenditure as per rule 4(6) of CSR Policy, Rules 2014.

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