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KPMG in INDIA

The MCA provides clarity on Corporate Social Responsibility under the

Companies Act, 2013

23 June 2014

22

21 February 2013

Background

The Ministry of Corporate Affairs (MCA) has received

several references and representation from various

stakeholders seeking clarifications on the following:



Section 135 on Corporate Social Responsibility

(CSR) of the Companies Act, 2013 (the Act)



The Companies (Corporate Social Responsibility

Policy) Rules, 2014 (the Rules)



The types of activities to be undertaken as per

schedule VII of the Act.

On 18 June 2014, the MCA has provided following

clarifications:

Constitution of the CSR committee

All companies covered under the Act are required to

constitute CSR committee under Section 135, if they

meet any one of the following conditions:



Turnover of INR10,000 million or more



Net worth of INR5,000 million or more



Net profit of INR50 million or more during any

financial year.

Any financial year’ referred under section 135(1) and

Rule 3(2) has been clarified to mean ‘any of the three

preceding financial years’.

Broad range of activities covered

The CSR activities enumerated in schedule VII of the

Act are broad-based and are intended to cover a wide

range of activities. Thus, these prescribed activities

should be interpreted

liberally to capture their

essence i.e., if a proposed CSR activity is not

specifically mentioned in schedule VII of the Act, a

company can undertake such an activity as long as

the activity proposed is able to capture the essence of

items prescribed under schedule VII of the Act. The

MCA has also provided examples of the CSR activities

which are given in the table below.

Programme mode vs. one-off events

The CSR activities should be undertaken by a

company as a project/programme in accordance with

its approved CSR policy. One-off events such as

marathons/

awards/

charitable

contribution/

advertisement/ sponsorships of TV programmes, etc.

would not qualify...