Corporate Social Responsibility (CSR) is a form of self-regulation that reflects a business’s accountability and commitment to contributing to the well-being of communities and society through various environmental and social measures. The Companies Act, 2013, introduced Section 135, which mandates companies to spend a certain percentage of their profits on CSR registration. In this blog, we will discuss the CSR provisions under the Companies Act, 2013, the CSR Amendment Rules 2022, and the Companies CSR Policy Rules 2014.
Corporate Social Responsibility (CSR) is a type of business self-regulation with the aim of social accountability and making a positive impact on society. CSR practices are a way to demonstrate a business’s position on the matter and contribute to the greater good and not only greater profit. Some ways that a company can embrace CSR include being environmentally friendly and eco-conscious, promoting equality, diversity, and inclusion in the workplace, and supporting social causes.
The CSR provisions under the Companies Act, 2013, require companies to:
The Companies CSR Policy Rules 2014 provide guidelines for companies to develop their CSR policy. The CSR policy should include the following:
The Ministry of Corporate Affairs (MCA) has recently amended the CSR rules to provide more flexibility to companies in their CSR spending. The CSR Amendment Rules 2022 allow companies to carry forward unspent CSR funds for up to three financial years, instead of the earlier limit of two years. The amendment also allows companies to set off excess CSR spending in a financial year against the required CSR spending in the subsequent financial years.
In conclusion, the Companies Act, 2013, introduced Section 135, which mandates companies to spend a certain percentage of their profits on CSR activities. The CSR provisions under the Companies Act, 2013, require companies to spend at least 2% of their average net profits of the preceding three financial years on CSR activities, set up a CSR committee, develop a CSR policy, and disclose the CSR activities in the annual report of the company. The last amendment to the CSR rules provides more flexibility to companies in their CSR spending. By following the guidelines outlined in this blog, companies can ensure that they are in compliance with all the CSR laws and regulations.
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