Following are the provisions under Companies Act, 2013:
(i) Applicability :
Every company having a net worth of rupees five hundred crore or more, or a turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any 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. [Section 135(1)]
(ii) Expression in board report :
The board’s report under sub-section (3) of Section 134 shall disclose the composition of corporate social responsibility committee. [Section 135(2)]
(iii) Functions of corporate social responsibility committee :
- Formulate and recommend to the board, a corporate social responsibility policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII.
- Recommend the amount of expenditure to be incurred on the activities referred to in Clause (a)
- Monitor the corporate social responsibility policy of the company from time to time. [Section 135(3)]
(iv) Action taken by board : The board of every company referred to in sub – section (1) shall:
- After taking into account the recommendations made by the corporate social responsibility committee, approve the corporate social responsibility policy for the company and disclose the contents of such policy in its report and also place it on company’s website, if any, in such manner as may be prescribed.
- Ensure that the actitivites as are included in corporate social responsibility policy of the company are undertaken by the company. [Section 135(4)]
(v) CRS Expenditure : The board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent of the average net profit of the company made during the three immediately preceding financial years, in pursuance of its corporate social responsibility policy. [Section 135(5)]
(vi) Preference to local areas : That the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for corporate social responsibility activities. [Section 135(5)]
(vii) Mention of Failure to Spend : That if the company fails to spend such amount, the board shall, in its report made under clause (O) of sub-section (3) of Section 134, specify the reasons for not spending the amount. [Section 135(5)]
(viii) Calculation of net profits : For this purpose, average net profit will be calculated in accordance with the provisions of section 198.
(ix) Other Functions of Social responsibility :
- Every company including its holding or subsidiary and a foreign company defined under Clause (42) of Section 2 of the Act having its branch office or project office in India, which fulfils the criteria specified in sub section (1) of Section 135 of the Act.
- A company may also collobarate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.
- Subject to provision of sub-section (5) of Section 135 of the Act, the CSR projects or programs or activities undertaken in India only shall amount to CSR expenditure.
- The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with Section 135 of the Act.
- An unlisted public company or a private company covered under sub section (1) of section 135 which is not required to appoint an independent director pursuant to sub-section (4) of Section 149 of the Act shall have its CSR committee without such director.
- A private company having only two directors on its board shall consitute its CSR committee with two such directors.
- The CSR committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.
- CSR expenditure shall include all expenditure including contribution to corpus for projects or programs relating to CSR activates approved by the board on the recommendations of its CRS committee, but shall not include any expenditure on an item not in line with activities which fall within the purview of Schedule VII of the Act.
- CSR reporting : The board’s report of a company covered under these rules pertaining to a financial year commencing on or after the 1st day of April, 2014, shall include an annual report on CSR containing particulars specified in annexure.
- In case of a foreign company, the balance sheet filled under sub clause (b) of sub section (1) of Section 381 shall contain an annexure regarding report on CSR.
