CSR under Companies Act-2013 The CA 2013 makes CSR mandatory for corporate entities fulfilling certain threshold criteria (as shown below). Net worth of Rs 500 Crore or more Turnover of Rs 1000 Crore or more Net profit of Rs 5 Crore or more CSR: Companies Act 2013-Section 135 Companies Mandated to constitute a CSR Committee Networth of Rs 500 Crore or more Turnover of Rs 1000 Crore or more Net profit of Rs 5 Crore or more CSR Committee to have Three or more directors At least one is to be an independent director Board’s Report shall disclose the constitution of CSR Committee CSR Committee will Formulate CSR policy and recommend to board indicating the activities to be undertaken as specified in schedule vii Recommend the amount of expenditure to be incurred Monitor CSR Policy from time to time CSR: Companies Act,2013 Board of Directors will Approve CSR Policy Ensure implementation of CSR policy Disclose the contents of CSR policy in the Board report Place the same on company’s website Ensure CSR spending amounting to at least 2% of the average net profit of the preceding three financial years Board’s Report shall specify the reasons for not spending the specified amount There is no penalty for failure to spend 2% of net profit on CSR. Initially it was comply or explain approach. However, recently the government has introduced some stringent provisions, in case of non-compliance. CSR amendments under the Companies (Amendment) Act, 2019 Until now, if a company was unable to fully spend its CSR funds in a given year, it could carry the amount forward and spend it in the next fiscal, in addition to the money allotted for that year. The CSR amendments introduced under the Act now require companies to deposit the unspent CSR funds into a fund prescribed under Schedule VII of the Act within the end of the fiscal year. This amount must be utilized within three years from the date of transfer, failing which the fund must be deposited in to one of the specified funds. The new law prescribed for a monetary penalty as well as imprisonment in case of non-compliance. The penalty ranges from INR 50,000 (US$700) to INR 2.5 million (US$35,000) whereas the defaulting officer of the company may be liable to imprisonment for up to three years, or a fine up to INR 500,000 (US $7,023), or both. The government, however, diluted these provisions after the industry objected to it, especially with respect to the jail terms for CSR violations. Schedule VII Activities Eradicating extreme hunger & poverty Promotion of education Promoting gender equality and empowering women Reducing child mortality and improving maternal health Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases Ensuring environment sustainability Employment enhancing vocational skills Social business projects Contributions to Prime Minister Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Caste and Schedule Tribe Such other matters as may be prescribed Comment It is still early days CSR is not accepted by all companies It is more charity oriented, less sustainability oriented Thank You