Corporate Social Responsibility Under Section 135 of the Companies Act

Corporate social responsibility (CSR) has gained significant importance in India’s corporate commercial law. Section 135 of the Companies Act of 2013 mandates that companies invest a minimum of 2% of their net earnings in CSR initiatives. This section applies to companies meeting certain criteria. This article provides a comprehensive overview of Section 135 of the Companies Act, 2013, along with CSR provisions, amendment rules, and other relevant details.

What Does Section 135 of the Companies Act Mean?

Section 135 of the Companies Act, 2013, pertains to corporate social responsibility (CSR). It mandates that companies meeting specific revenue thresholds engage in CSR initiatives and allocate at least 2% of their net income from the previous three years to these efforts. Companies that meet the required criteria for net worth, turnover, or net profits must form a CSR committee and comply with CSR regulations. Additionally, companies incorporated under Section 8 of the Companies Act, 2013, for charitable purposes must adhere to CSR provisions.

CSR Provisions Under the 2013 Companies Act

Section 135 of the Companies Act, 2013, requires companies to allocate at least 2% of their net profit to CSR initiatives. The main provisions under Section 135 include:

• Companies must form a CSR committee if they meet the required thresholds for net worth, turnover, or net profits.
• The CSR committee is responsible for formulating and recommending a CSR policy to the board.
• Companies must disclose their CSR policy and activities in their annual board report and on their website.

CSR Amendment Rules, 2022

In 2022, the Ministry of Corporate Affairs announced new guidelines for the CSR Amendment Rules. According to these amendments, companies can execute CSR activities independently or through another entity established by Section 8 of the Companies Act, a registered public trust, a registered society founded by the company, or by the Central Government or a state.

Companies CSR Policy Rules 2014

The CSR Policy Rules introduced in 2014 guide companies in creating their CSR policies. Key provisions include:

• The CSR policy must be approved by the board of directors.
• The company must disclose details of its CSR policy in its annual board report.
• The company is required to publish information about its CSR initiatives on its website.

Process for Filing Form CSR-1

Form CSR-1 can be filed online on the MCA portal. The steps involved are:

1. Download Form CSR-1: Log in to the MCA Portal and download the fillable PDF version of Form CSR-1.
2. Digital Signature: The form must be digitally signed by:
   • Any director not disqualified by the Companies Act of 2013 for a Section 8 company.
   • One of the Trustees or CEO for a registered public trust.
   • The Chief Executive Officer/Secretary for a registered society.
   • An authorized agent for an organization founded by a state legislature or parliamentary act.
3. Professional Certification: The form must also be digitally confirmed by a full-time practicing chartered accountant, company secretary, or cost accountant.
4. Document Upload: Upload the signed documents.
5. SRN Generation: Upon successful upload and submission, an SRN (Service Request Number) will be generated for future communications with MCA.
6. Fee Payment Confirmation: A challan detailing the applicant’s fee payments will be generated after submission.
7. CSR Registration Number: An automatic CSR registration number will be generated, and an approval letter will be mailed to the company’s official address.

Conclusion

Section 135 of the Companies Act, 2013, mandates that companies allocate at least 2% of their net profit to CSR initiatives. Companies meeting specific criteria must comply with these provisions. The Ministry of Corporate Affairs updated the CSR Amendment Rules in 2022, allowing companies to implement CSR activities independently or through other entities. The Companies CSR Policy Rules of 2014 help guide companies in creating their CSR policies. Companies must adhere to these rules and contribute to social and environmental issues as responsible corporate citizens.