All you need to know about Section 135 of the Companies Act

Introduction

Corporate Social Responsibility (CSR) is a concept that has gained significant importance in India’s corporate commercial law. The Companies Act, 2013 introduced Section 135, which mandates companies to spend a minimum of 2% of their net profit on CSR activities. The CSR provisions under the Companies Act, 2013 are applicable to companies that meet certain criteria. In this blog, we will discuss Section 135 of the Companies Act, 2013 in detail, including the CSR provisions, CSR amendment rules, and other relevant information.

What is Section 135 of the Companies Act?

Section 135 of the Companies Act, 2013 deals with Corporate Social Responsibility (CSR). It mandates companies meeting certain financial thresholds to undertake Corporate Social Responsibility (CSR) activities and spend at least 2% of their net profits over the preceding three years on such activities. Every company having the specified net worth, turnover, or net profits must establish a CSR committee and comply with CSR provisions. Companies registered for a charitable purpose under Section 8 of the Companies Act, 2013 are also required to comply with CSR provisions.

CSR Provisions under Companies Act 2013  

Section 135 of the Companies Act, 2013 mandates companies to spend a minimum of 2% of their net profit on CSR activities. The following are the CSR provisions under Section 135:

• Companies having a net worth of Rs. 500 crore or more.
• Companies having a turnover of Rs. 1,000 crore or more.
• Companies having a net profit of Rs. 5 crore or more.

CSR Amendment Rules, 2022

The Ministry of Corporate Affairs released new guidance on the CSR Amendment Rules in 2022. The amendment allows companies to undertake their CSR implementation either by themselves or through another company established under Section 8 of the Companies Act, a registered public trust, or a registered society established by the company itself, by the Central Government or State.

Companies CSR Policy Rules 2014  

The Companies CSR Policy Rules were introduced in 2014 to provide guidelines for companies to formulate their CSR policies. The following are the key provisions under the Companies CSR Policy Rules:

• The board of directors of a company subject to Section 135 are required to approve the CSR policy.
• The company must disclose the contents of the policy in its annual board report.
• The company must publish the details of its CSR activities on its website.

Process for filing form CSR-1 online  

Form CSR-1 can be filed online on the MCA portal:

Step 1: One needs to login to MCA Portal and download the Form CSR-1

Step 2: Form CSR-1 will be available in fillable PDF form.

Step 3: The Form CSR-1 shall be digitally signed by:

• In case of Section 8 Company: any director who is not disqualified under provisions of Companies Act, 2013

• In case of Registered Public Trust: One of the Trustee/ CEO

• In case of a Registered Society: Chairman/ CEO/ Secretary

• In case of an entity established under an Act of Parliament or State Legislature: Authorized representative on their behalf

Step 4: It shall also be ensured that the Form is digitally verified by a Chartered Accountant/ Company Secretary/ Cost Accountant in full time practice.

Step 5: Once signed, the next step would be to upload documents.

Step 6: Upon uploading the documents and successful submission, an SRN will be Generated. This SRN shall be used for the future correspondence with MCA.

Step 7: Once successful submission, a challan with the details of the fees paid by the applicant will be generated.

Step 8: At last, a CSR Registration number will be generated automatically and an approval letter will be sent to the official mail of the company.

Conclusion  

Section 135 of the Companies Act, 2013 mandates companies to spend a minimum of 2% of their net profit on CSR activities. The provisions under this section are applicable to companies that meet certain criteria. The Ministry of Corporate Affairs released new guidance on the CSR Amendment Rules in 2022, which allows companies to undertake their CSR implementation either by themselves or through another company established under Section 8 of the Companies Act, a registered public trust, or a registered society established by the company itself, by the Central Government or State. The Companies CSR Policy Rules were introduced in 2014 to provide guidelines for companies to formulate their CSR policies. It is important for companies to comply with these provisions and contribute towards social and environmental causes as responsible corporate citizens.