Company Formation & Administration

Corporate Social Responsibility

According to the Companies Act, 2013, every company having a net worth of INR 5 billion or more, or turnover of INR 10 billion or more, or a net profit of INR 50 million or more, during any financial year, shall constitute a Corporate Social Responsibility (CSR) Committee of the Board, consisting of three or more directors, of which at least one must be an independent director. Every company, its holding or subsidiary company, or a foreign company having a branch or project office in India, which individually fulfills any one of the criteria mentioned above will be considered a ‘qualifying company’ and would then need to mandatorily perform all the CSR activities specified in Section 135 of the Companies Act, 2013 read with the CSR Rules during any financial year.

The CSR Committee must

  • Formulate and recommend to the Board, a CSR Policy that shall indicate the activities to be undertaken by the company;
  • Recommend the amount of expenditure to be incurred on these activities;
  • Monitor the CSR Policy of the company from time to time.

The Act expressly states that during the implementation of the CSR Policy, preference must be given by the company to the local area and the area around which it operates. The CSR Rules lay down the method of implementation of CSR activities.

The Act provides the following roles and responsibilities (in regard to CSR) for the Board of Directors:

  • Approval of the CSR Policy of the company;
  • Disclosing the content of the Policy in the report of the Board of Directors;
  • Placing the Policy on the company’s website;
  • Ensuring that the CSR Policy is implemented, and the activities undertaken by the company are carried out;
  • Ensuring that the company spends, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding fiscal years;
  • Ensuring that, if the earmarked amount is not spent, the same is specified in its report along with the reasons for not spending and taking steps to subsequently spend the CSR amount;
  • The Board shall have the power to make any change(s) in the constitution of the CSR Committee.
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Virender Bhasin
Executive Director
Entity Set-up & Management

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