The Companies (Amendment) Act 2020 will be coming into effect now, with a primary purpose to decriminalize various offences. However, the following amendments have been brought about with respect to Corporate Social Responsibility requirements from companies.
Applicability of CSR Provisions
CSR provisions as specified under Section 135 of the Companies Act, 2013 are applicable on companies which satisfy any of the following criteria:
(a) Net worth of Rs. 500 crore or more;
(b) Annual Turnover of Rs. 1000 crore or more;
(c) Net Profit of Rs. 5 crore or more.
Such companies are required to spend at least 2% of their average net profit for the immediately preceding 3 financial years on CSR activities as directed and deliberated by a duly constituted CSR Committee as per an officially formulated and published CSR Policy.
There are no changes in the applicability provisions.
Relaxation from Formation of CSR Committee
It has now been proposed not to constitute CSR Committee in case the amount required to be spent under CSR does not exceed Rs. 50 lakh.
However, this does not absolve the company from its requirement to discharge CSR liability.
Setting off Excess Payment under CSR in Future Years
The Act now allows CSR applicant companies which have spent an amount in excess of the requirement of the Act to set off such excess amount out of their obligation in the succeeding financial years in such manner as may be provided by the rules.
Penalty for Non Compliance
Non compliance of CSR provisions may invite penalty of twice the amount required to be transferred by the company to the Unspent CSR account or Rs. 1 crore, whichever is less.
In addition, every officer shall also be liable to pay a penalty of 1/10th of the amount required to be transferred in Unspent CSR Account or Rs. 2 lakh, whichever is less.
