New Delhi, Oct 8 () Penal action will be initiated against 160 firms for failing to comply with CSR norms under the companies law, according to Union Minister P P Chaudhary.
The Minister of State for Corporate Affairs also asserted that the government does not interfere with regard to allocation of CSR funds by firms while compliance is monitored by way of mandatory disclosure requirements under the Companies Act, 2013.
Under the Act, certain class of profitable entities are required to shell out at least 2 per cent of their three-year annual average net profit towards Corporate Social Responsibility (CSR) activities. In case of not spending the requisite amount, the firms concerned have to provide reasons for the same.
The corporate affairs ministry, which is keeping a close tab on companies' compliance with the CSR provisions, had served show-cause notices to 1,018 defaulting entities.
After receiving reports from the Regional Directors (RDs) and Registrar of Companies (RoCs), the ministry has now decided to initiate penal action against many entities.
"The ministry has accorded permission for initiating penal action under Section 134(8) of the Act for non- compliance... against 160 companies," Chaudhary told in an interview.
The action is being taken for failing to comply with provisions of Section 135 -- which pertains to CSR.
Among others, Section 134(8) provides for imposing a minimum fine of Rs 50,000 and the amount may go up to Rs 25 lakh for certain violations.
The penal action is being initiated with respect to non- compliance during the 2014-15 financial year.
As per data provided by the ministry earlier this year, as many as 12,431 companies had spent Rs 18,625 crore towards CSR activities during 2014-15 and 2015-16. Out of the total, 7,334 firms had shelled out Rs 8,803 crore in 2014-15.
According to Chaudhary, as far as spending the CSR amount is concerned, it is for the companies to decide.
"Earmarking of CSR funds of companies for any particular activity/ activities is beyond the purview of the Companies Act, 2013," and the boards of respective companies have been empowered under the law to take decisions with respect to allocation of such funds, the minister said. RAM ABM SBT
The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation by the Author. Compliance Calendar LLP and the Author of this Article do not constitute any sort of professional advice or a formal recommendation. The author has undertaken utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify and confirm the updates from the genuine sources before acting on any of the information’s provided hereinabove. Compliance Calendar LLP shall not be responsible for any loss or damage in any circumstances whatsoever.