Corporate Social Responsibility Under Section 135 of Companies Act 2013

Corporate Social Responsibility (CSR) means the voluntary contributions made by companies to a better society and a cleaner environment. It is a concept whereby companies integrate social and other useful concerns in their business operations for the betterment of their stakeholders and society in general.

However, Section 135 of the Companies Act, 2013 (“Act”) provides that certain companies must mandatorily contribute a certain amount towards CSR activities. As per the Act, ‘Corporate Social Responsibility’ means and includes but is not limited to:

• Projects or programmes relating to activities specified in Schedule VII to The Act.
• Projects or programmes relating to those activities which are undertaken by the Board of Directors of a company in ensuring the recommendation of the CSR Committee of the Board as per declared CSR Policy along with the conditions that such policy will cover subjects specified in Schedule VII of the Act.

The provisions of CSR applies to every company fulfilling any of the following conditions in the preceding financial year :

• Net worth of Rs.500 crore or More
• Turnover of Rs.1000 crore or More
• Net profit of Rs.5 crore or More

 The Board of Directors of every company for which the CSR provisions apply must ensure that the company spends in every financial year at least 2% of its average net profits made during the immediately preceding three financial years as per its CSR policy. 

If the company has not completed three financial years since its incorporation, it must spend 2% of its average net profits made during the immediately preceding financial years as per its CSR policy.