Corporate Social Responsibility under Companies Act, 2013

Pragya Lalwani

The Companies Act, 2013, has brought in certain new concepts, one of which is corporate social responsibility (CSR) in the form of section 135. In view of the said provision, a liability has been cast on each company, having specified quantum of net worth or turnover or net profit, to constitute a Corporate Responsibility Committee of Directors and ensure a minimum CSR Expenditure by company in every financial year. Such spending has to be made in accordance with the provision of Companies Act, 2013 and the rules made thereunder on the basis of recommendation of the above said Committee. The learned author, in this article has analysed the said provision and rules made thereunder i.e., Companies (Corporate Social Responsibility Policy) Rules, 2014.

1. Introduction

The term corporate social responsibility (CSR) in its wider sense means and includes a sense of responsibility by a corporate in regard to residents of area of its operation and residents of other areas, which are somewhere connected with the company, in respect of their economic, social and environmental factors. The idea of introducing CSR provisions is to give better quality of life to public at large by covering various elements in CSR policy viz., care for all stakeholders, respect for environment or activities including social and inclusive development, etc. Further, it should be kept in mind that CSR expenditure is made not for profits as CSR activities does not include the activities undertaken in pursuance of normal course of business of a company.

2. Threshold for applicability of CSR provisions

As per section 135 of the Companies Act, CSR provisions would be applicable to every company having :--

(i) net worth of rupees five hundred crore or more; or

(ii) turnover of rupees one thousand crore or more; or

(iii) a net profit of rupees five crore or more

during any of the three preceding financial years.

(i) Contribution or Expenditure to be made