Amendment in CSR provisions

The Ministry of Corporate Affairs had vide its Notification dated 19th September 2018 made the amendments notified under the Companies (Amendment) Act, 2017 relating to applicability of provisions of Corporate Social Responsibility(CSR), effective from 19th September 2018. The Copy of the said notification has been enclosed for kind reference.

The details of the amendments are as under:

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 any financial year shall constitute a Corporate Social Responsibility(CSR) Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

However, upon substitution, the provisions of subsection 1 of section 135 read as under:

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(CSR) 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.”.

The Corporate Social Responsibility(CSR) Committee shall,—

(a) formulate and recommend to the Board, a Corporate Social Responsibility(CSR) Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;

However, upon substitution, the provisions of subsection 3(a) of section 135 read as under:

The Corporate Social Responsibility(CSR) 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 in areas or subject, specified in Schedule VII;

Explanation.—For the purposes of this section “average net profit” shall be calculated in accordance with the provisions of section 198.

However, upon substitution, the Explanation under sub-section 5 of section 135 read as under:

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.’.

In view of the above-said amendments, a Company would not be required to undertake the compliances relating to Corporate Social Responsibility(CSR) if a Company, during the immediately preceding financial year, does not meet the criteria of:

• net worth of Rs. 500 crores or more; or
• turnover of Rs. 1,000 crores or more; or
• a net profit of Rs. 5 crores or more.

The other amendments stated at point no. 2 and 3 above are self-explanatory.

The notification has been published in the official gazette.