The 2013 Act requires that every company with net worth of`500 crore or more, or turnover of `1,000 crore or more or a net profit of 5 crore or more during any financial year will constitute a CSR committee.

The CSR Rules state that every company, which ceases to be a company covered under the above criteria for three consecutive financial years, will not be required to (a) constitute the CSR Committee, and (b) comply with other CSR related requirements, till the time it again meets the prescribed criteria.

Constitution of CSR committee

The 2013 Act requires a company, which meets the CSR applicability criteria, to constitute a CSR committee comprising three or more directors. The 2013 Act also states that out of these three directors, at least one director should be an independent director.

The CSR Rules state that a non-listed public company or a private company, which is not required to appoint an independent director as per the 2013 Act/ Directors’ Appointment Rules, can have its CSR Committee without an independent director. Also, a private company having only two directors on its board can constitute the CSR Committee with the two directors.

Some people argue that the CSR Rules are changing the requirements of the 2013 Act. Hence, an issue arises whether a subordinate legislation can override the main legislation. However, most people are likely to welcome the clarifications provided in the CSR Rules.

CSR expenditure

In accordance with the 2013 Act, the board of each company covered under the CSR requirement needs to ensure thatthe company spends, in every financial year, at least 2% of its average net profits made during the three immediately preceding financial years in pursuance of CSR policy. Neither the 2013 Act nor the CSR Rules prescribe any specific penal provision if a company fails to spend the 2% amount. However, the board, in its report, needs to specify the reasons for not spending the specified amount.

How we can help you:-

• Identify the avenues & suitable cause, where by the company not just spend money as per compliance but also gain market visibility.
• 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
• Monitor the Corporate Social Responsibility Policy of the company from time to time on behalf of the company