Section 135 of the Companies Act, 2013 including latest amendments in Schedule VII

Section 135: Corporate Social Responsibility

[1] Every company having-

(i) net worth of rupees five hundred crore or more, or

(ii) turnover of rupees one thousand crore or more, or

(iii) a net profit of rupees five crore or more

during the three immediately preceding financial year, shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

Provided that where a company is not required to appoint an independent director under sub-section [4] of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.

(From thet first proviso of Section 135, it is clearly evident that it overrides section 149(4) of the Act.)

[2] The Board's report under sub-section [3] of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

[3] The Corporate Social Responsibility Committee shall,—

[a] formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII;

[b] recommend the amount of expenditure to be incurred on the activities referred to in clause [a]; and

[c] monitor the Corporate Social Responsibility Policy of the company from time to time.

[4] The Board of every company referred to in sub-section [1] shall,—

[a] after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed in rule 9 of the Companies(Corporate Social Responsibility Policy) Rules, 2014; and

[b] ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

Rule 9: Display of CSR Activities on its Website

The Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company’s website, if any, as per the particulars specified in the Annexure.

[5] The Board of every company referred to in sub-section [1], shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause [o] of sub-section [3] of section 134, specify the reasons for not spending the amount.

Exception to this section:-

In case of Specified IFSC Public/Private Company - Section 135 shall not apply for a period of five years from the commencement of business of such company. 

[Notification Dated 4th January, 2017]

The list of CSR activities enumerated under Schedule VII of the Companies Act have been amended by the government from time to time.

Contribution to PM Cares Fund

Ministry vide Office Memorandum F. No. CSR-05/1/2020-CSR-MCA dated 28th March, 2020 has clarified that contribution made to "PM Care Fund" shall qualify as CSR Expenditure under item no. (viii) of Schedule VII of the Companies Act, 2013. The ministry has also issued several FAQs on CSR vide General Circular no. 15/ 2020 dated 10th April, 2020 on the request of various stakeholders seeking clarification on eligibility of CSR Expenditure related to COVID19 Activities.

The Government of India has set up the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund' (PM CARES Fund) with the objective of dealing with any kind of expenditure incurred w.r.t emergency or distress situation such as that posed by COVID 19 pandemic.

Amendment to Schedule VII of Companies Act, 2013

The Ministry of Corporate Affairs (MCA) has amended the item no (viii) of Schedule VII of the Companies Act, 2013 vide Notification no. CG-DL-E-26052020-219562 dated 26th May 2020 wherein " PM CARES Fund has been inserted with PMNRF Fund ". It may now be included by companies in their Corporate Social Responsibility Policies Activities.

The Notification can be read as follows:-

G.S.R.313(E) - In exercise of the powers conferred by sub-section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following further amendment to Schedule VII of the said Act, namely:

1. In Schedule VII, item (viii), after the words "Prime Minister's National Relief Fund", the words "or Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)" shall be inserted.

2. This notification shall be deemed to have come into force on 28th March, 2020.

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