Finance minister to review jail term clause for non-compliance of CSR

  1. Finance Minister has assured the industry that the government would review the criminal penal provisions on corporate social responsibility (CSR).
  2. The amendments to the Companies Act have empowered the government to put the concerned officers in jail for up to three years, besides imposing monetary fines if they do not adhere to CSR norms.
  3. The amendments also says that any unspent annual CSR funds must be transferred to one of the funds under Schedule 7 of the Act (for example, the Prime Minister’s Relief Fund) within six months of the financial year.
  4. Prior to that,companies that were required to budget for Corporate Social responsibility(CSR) used to disclose in their annual reports the reasons why they were unable to fully spend these funds.
  5. Corporate social responsibility (CSR) was initiated through the Companies Act, 2013.The act mandated companies and government organisations with (a)turnover of Rs1,000 crore or more(b)net worth exceeding Rs 500crore or (c)having more than Rs 5 crore in net profits,to set aside 2% of their average net profits for CSR activities.
  6. Further as per the CSR Rules,the provisions of CSR are not only applicable to Indian companies but also applicable to branch and project offices of a foreign company in India.
  7. The qualifying company are required to constitute a CSR Committee consisting of 3 or more directors.Further,CSR Committee are required to formulate and recommend to the Board, a policy which indicates the activities to be undertaken, allocate resources and monitor the CSR Policy of the company.