Corporate
Social Responsibility
Every company having net worth of
rupees five hundred crore or more, or turnover of rupees one thousand crore or
more or a net profit of rupees five crore or more during [the 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.
Provided that where a company is
not required to appoint an independent director under sub-section (4) of
section 149, it shall have in its Corporate Social Responsibility Committee two
or more directors.
(2) The Board's report under
sub-section (3) of section 134 shall disclose the composition of the Corporate
Social Responsibility Committee.
(3) 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.
(4) The Board of
every company referred to in sub-section (1) shall—
(a) after taking into account the
recommendations made by the Corporate Social Responsibility Committee, approve
the Corporate Social Responsibility Policy for the company and disclose
contents of such Policy in its report and also place it on the company's
website, if any, in such manner as may be prescribed; and
(b) ensure that the activities as
are included in Corporate Social Responsibility Policy of the company are
undertaken by the company.
(5) 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 profits of the
company made during the three immediately preceding financial years or where
the company has not completed the period of three financial years since its
incorporation, during such immediately preceding financial years, in pursuance
of its Corporate Social Responsibility Policy
Provided 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:
Provided further 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 8[and, unless the unspent amount relates to any ongoing
project referred to in sub-section (6), transfer such unspent amount to a Fund
specified in Schedule VII, within a period of six months of the expiry of the financial
year.
Explanation- For the purposes of
this section "net profit" shall not include such sums as may be
prescribed, and shall be calculated in accordance with the provisions of
section 198.
(6) Any amount remaining unspent
under sub-section (5), pursuant to any ongoing project, fulfilling such
conditions as may be prescribed, undertaken by a company in pursuance of its
Corporate Social Responsibility Policy, shall be transferred by the company
within a period of thirty days from the end of the financial year to a special
account to be opened by the company in that behalf for that financial year in
any scheduled bank to be called the Unspent Corporate Social Responsibility
Account, and such amount shall be spent by the company in pursuance of its obligation
towards the Corporate Social Responsibility Policy within a period of three
financial years from the date of such transfer, failing which, the company
shall transfer the same to a Fund specified in Schedule VII, within a period of
thirty days from the date of completion of the third financial year.
(7) If a company contravenes the
provisions of sub-section (5) or sub-section (6), the company shall be
punishable with fine which shall not be less than fifty thousand rupees but
which may extend to twenty-five lakh rupees and every officer of such company
who is in default shall be punishable with imprisonment for a term which may
extend to three years or with fine which shall not be less than fifty thousand
rupees but which may extend to five lakh rupees, or with both.
(8) The Central Government may
give such general or special directions to a company or class of companies as
it considers necessary to ensure compliance of provisions of this section and
such company or class of companies shall comply with such directions.
1. Clarification related to
Schedule VII -Dated 18.06.2014. (Point
(iv) has been Omitted - Refer Clarification Dated-17.09.2014)
2. Clarification related to above
Clarification Dated-17.09.2014.
3. Clarification with regard to
provisions under section 135 (5) of the Companies Act, 2013.
DISCLAIMER: THE ARTICLE IS BASED ON
THE RELEVANT PROVISIONS AND AS PER THE INFORMATION EXISTING AT THE TIME OF THE
PREPARATION. IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT AND INDIRECT RESULT
FROM THIS ARTICLE. THIS IS ONLY A KNOWLEDGE SHARING INITIATIVE.
THE AUTHOR – CS DEEPAK
SETH (ASSOCIATE PARTNER HELPINGHANDS PROFESSIONALS LLP) AND CAN BE
REACHED AT CONTACTHHPRO@GMAIL.COM OR 9910248911.
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