Amendments in the Provisions of Corporate Social Responsibility

The President of India had on July 31, 2019, assented to The Companies (Amendment) Act, 2019 thereby amending some of the sections of the Companies Act, 2013 (hereinafter referred to as “Act”). While the provisions of Companies (Amendment) Act, 2019 shall be deemed to have come into force on the 2^nd day of November 2018, the provisions of Section 135 of the Companies Act, 2013 relating to Corporate Social Responsibility (“CSR”) have not yet been made effective. With a view to ensuring stricter enforcement of compliance, requisite amendments have been made in the provisions relating to the contribution for Corporate Social Responsibility with the introduction of the penal clause. The summary of the amendments in respect of applicability of CSR is as follows: Applicability of Corporate Social Responsibility – Section 135 of Companies Act, 2013: Earlier Provision: Section 135(5) of the Companies Act, 2013: The Board of every company referred to in sub-section *(1), shall ensure that the company spends in every financial year, at least two percent of the average net profits of the company made during the three 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. Explanation.—For the purposes of this section “average net profit” shall be calculated in accordance with the provisions of section 198. Download the Complete Information Here   Last Updated: 23^rd August 2019 This article is contributed by:  Luv Malhotra Manager, Legal

Tag: Corporate Social Responsibility, CSR