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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Corporate Social Responsibility (CSR)

Kaveri Textiles Ltd, an unlisted public company with no independent directors required under the Act, reported a net profit of Rs 6 crore in the immediately preceding financial year, though its net worth and turnover were below the thresholds. Its CSR spend obligation exceeds Rs 50 lakh. Which statement is correct about its CSR Committee?

The company must constitute a CSR Committee with at least two directors. Any one of the net worth, turnover or net profit thresholds triggers section 135, and the proviso reduces the committee size where no independent director is required. The spend exceeds Rs 50 lakh, so the Board cannot take over the functions.

  1. AIt must constitute a CSR Committee of at least two directors, because it is not required to appoint an independent directorCorrect
  2. BIt need not constitute any committee because net profit alone does not trigger section 135
  3. CIt must constitute a CSR Committee of three directors including one independent director
  4. DThe Board may discharge the committee functions because the company is unlisted

Explanation

Net profit of Rs 5 crore or more in the immediately preceding financial year alone triggers section 135(1); any one threshold is enough. Since the obligation exceeds Rs 50 lakh, the committee is needed. The proviso allows two or more directors where an independent director is not required under section 149(4). Option three is wrong because the independent director requirement does not apply here.

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