What are the compliance requirements under the Companies Act, 2013, for private companies with an annual turnover exceeding ₹100 crores as per Section 135 regarding Corporate Social Responsibility (CSR)?

Detailed Legal Analysis

Private companies with an annual turnover exceeding ₹100 crores are mandated to comply with Corporate Social Responsibility (CSR) provisions under Section 135 of the Companies Act, 2013.

According to Section 135, the compliance requirements include the following:

• Applicability: CSR provisions apply to companies meeting at least one of the following criteria in the previous financial year:
  • Net worth of ₹500 crores or more
  • Annual turnover of ₹1,000 crores or more
  • Net profit of ₹5 crores or more
• CSR Policy: Companies are required to formulate a CSR Policy which should include:
  • The activities to be undertaken as per Schedule VII of the Companies Act, 2013.
  • The approach and methodology for the implementation of CSR projects.
  • A monitoring mechanism for CSR activities.
• CSR Committee: Companies must establish a CSR Committee consisting of:
  • At least three directors, including at least one independent director.
• Minimum CSR Spend: A company is required to spend at least 2% of its average net profits (calculated as per Section 198) made during the three immediately preceding financial years on CSR activities.
• CSR Reporting: Companies must disclose their CSR activities in their Board Report, which should include:
  • The composition of the CSR Committee.
  • Details of CSR policy and projects undertaken.
  • The amount spent during the financial year.
• Annual CSR Report: Companies must file an annual report on CSR activities in Form CSR-1, as specified by the Ministry of Corporate Affairs.
• Activities under Schedule VII: CSR activities must align with the activities listed under Schedule VII of the Companies Act, which include:
  • Eradicating hunger, poverty, and malnutrition.
  • Promoting education and employment.
  • Environmental sustainability.
  • Promoting gender equality and empowering women.
  • Ensuring ecological balance, etc.

Failure to comply with these requirements can result in penalties as prescribed under Section 134 and Section 450 of the Companies Act, 2013.