Section 135: A Comprehensive Guide to Corporate Social Responsibility (CSR) under the Companies Act

the concept of Corporate Social Responsibility (CSR) has gained significant importance in India's corporate commercial law. Section 135 of the Companies Act, 2013, mandates companies to invest a minimum of 2% of their net earnings in CSR initiatives. In this blog, we will delve into the details of Section 135, CSR provisions, amendment rules, and other relevant aspects.What is Section 135 of the Companies Act?

What is Section 135 of the Companies Act?

Section 135 of the Companies Act, 2013, addresses Corporate Social Responsibility (CSR). It requires companies that meet specific revenue levels to engage in CSR initiatives and allocate a minimum of 2% of their net income from the previous three years to these endeavors. All companies that meet the required thresholds for net worth, turnover, or net profits need to form a CSR committee and adhere to CSR regulations.

CSR Provisions under the 2013 Companies Act

Companies are required to allocate at least 2% of their net profit to CSR initiatives. The CSR provisions under Section 135 are as follows:

CSR Amendment Rules, 2022

In 2022, the Ministry of Corporate Affairs published updated guidelines on the CSR Amendment Rules, enabling companies to implement CSR on their own or through another company established by Section 8 of the Companies Act, a registered public trust, a registered society founded by the company, the Central Government, or a state.

Companies CSR Policy Rules, 2014

To guide companies when creating their CSR policies, CSR Policy Rules were introduced in 2014. The significant provisions under the company's CSR Policy Rules are:

• The CSR policy of a company governed by Section 135 must be approved by the board of directors.
• In its annual board report, the company is required to reveal the details of its policy.
• The company is required to publish information about its CSR initiatives on its website.

Process for Filing Form CSR1

The Form CSR1 can be filed online on the MCA portal. The steps to file Form CSR1 are:

1. Log in to the MCA Portal and download the Form CSR-1.
2. A fillable PDF version of Form CSR-1 will be accessible.
3. The Form CSR-1 shall be digitally signed by:
   • In Section 8 of a company, any director who is not disqualified by the Companies Act of 2013.
   • If registered public trust: one of the Trustees or CEO.
   • If a society is registered: Chief Executive Officer/Secretary.
4. The form must also be digitally confirmed by a full-time practicing chartered accountant, company secretary, or cost accountant.
5. Document uploading would be the next step after signing.
6. An SRN will be generated following the successful upload of the documents and submission. For all future communications with MCA, this SRN will be used.
7. Following a successful submission, a challan with details of the applicant's fee payments will be generated.
8. Finally, an automatic CSR registration number will be generated, and a letter of approval will be mailed to the company's official mail address.

Conclusion

Section 135 of the Companies Act, 2013, mandates companies to devote at least 2% of their net profit to CSR initiatives. Companies that meet specific criteria are subject to the provisions outlined in this section. As corporate citizens, companies must abide by these rules and support social and environmental issues.

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