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Corporate Social Responsibility – Cabinet modifies Companies Act 2013

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Corporate Social Responsibility – Cabinet modifies Companies Act 2013

Corporate Social Responsibility – For companies that are not able to spend their full amount for CSR activities in ongoing projects within a particular financial year, the money can be transferred to a CSR account. The latter amount has to be spent within the next three financial years

Corporate Social Responsibility amendment is underway. The government approved 43 amendments to the companies law .

It seeks to further strengthen the regulatory framework and ensure stricter action for violations and tweaking provisions for unspent CSR funds, a slew of changes were cleared by the Union Cabinet on Wednesday.

A key change pertains to CSR norms, wherein companies would be allowed to keep unspent money in another account.

For companies that are not able to spend their full amount for Corporate Social Responsibility activities in ongoing projects within a particular financial year, the money can be transferred to a CSR account.

The latter amount has to be spent within the next three financial years, sources said.

Any amount remaining un utilised in such CSR account would be transferred to any fund specified in Schedule VII of the Act.

Besides, Section 135 would be amended to provide for a specific penal provision in case of non-compliance and authorise the corporate affairs ministry to give directions to companies for ensuring compliance with CSR provisions.

Section 135 pertains to CSR. Under the Act, certain class of profitable companies are required to shell out at least two per cent of their three-year annual average net profit towards CSR activities.

CSR funds are utilised for lot of development works in India. This proposed amendments will further bring accountability towards proper fund utilisation.

“The amendments will benefit law abiding corporates while simultaneously plugging gaps in the corporate governance and compliance framework enshrined in the Companies Act, 2013,”

Procedural and technical defaults would be decriminalised while compliance would be incentivised.

 

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