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QUESTION:. Discuss CSR reporting under the Companies Act, 2013.
ANSWER:Under the Companies Act, 2013, Corporate Social Responsibility (CSR) reporting is mandated for certain companies. Here are the key points:
Applicability
CSR provisions apply to companies with:
- A net worth of ₹500 crore or more
- A turnover of ₹1,000 crore or more
- A net profit of ₹5 crore or more during any financial year
CSR Committee
Such companies must constitute a CSR Committee consisting of at least three directors, one of whom must be an independent director.
CSR Policy
The CSR Committee is responsible for:
- Formulating and recommending a CSR policy to the Board
- Recommending the amount of expenditure to be incurred on CSR activities
- Monitoring the CSR policy from time to time
CSR Expenditure
The Board must ensure that the company spends at least 2% of its average net profits made during the immediately preceding three financial years on CSR activities. 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.
Reporting
The Board’s report must disclose:
- The composition of the CSR Committee
- The CSR policy and the activities undertaken
- The amount spent on CSR activities
Non-Compliance
If a company fails to spend the required amount, it must specify the reasons in its Board’s report and transfer the unspent amount to a fund specified in Schedule VII within six months of the expiry of the financial year.
Preference for Local Areas
Companies are encouraged to give preference to the local area and areas around where they operate for spending the CSR amount.
This framework ensures that companies contribute to social welfare and sustainable development while maintaining transparency and accountability in their CSR activities.
Does this help clarify CSR reporting under the Companies Act, 2013 for you?