In a positive development for the Sector, Lok Sabha has passed Companies Bill 2011. The Bill includes provision for a mandatory 2% CSR contribution by the companies. Clause 135 requires that every company which fulfills any of the following criteria in a financial year:
- a networth of more than Rs 500 crores or
- net profit of more than Rs 5 crores in a year or
- turnover of Rs.1000 crores
has to constitute a “CSR Committee of the Board” consisting of at least 3 directors including an independent director.
These companies have to spend minimum 2% of “last three years’ average net profits” towards CSR policy. If not spent, board has to give detailed reasons for not spending on CSR in the Director’s Report.
Role of the Committee
The Committee is to formulate and recommend to the Board a Corporate Social Responsibility Policy which should indicate the activities to be undertaken by the Company. Additionally, the Committee has to also recommend the quantum of expenditure to be incurred on these activities. Finally, the Committee has to monitor the Corporate Social Responsibility Policy of the company from time to time.
It is hoped that Rajya Sabha also undertakes the legislative business during this session itself and passes the Companies Bill 2011.