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CS Professional · CSR and Social Governance · Corporate Social Responsibility

Nila Foods Ltd has an average net profit of Rs 20 crore over the three immediately preceding financial years, so its required CSR amount under section 135(5) is Rs 40 lakh. Which statement about its governance structure is correct?

No CSR Committee is needed because the required spend, two per cent of Rs 20 crore, is Rs 40 lakh, which does not exceed fifty lakh rupees. Under section 135(9) the Board of Directors discharges the Committee's functions, while the Policy and spending obligations continue.

  1. AIt must constitute a CSR Committee of at least three directors including one independent director
  2. BThe CSR Committee is not required, and the Board of Directors discharges the Committee's functions, since the amount does not exceed fifty lakh rupeesCorrect
  3. CIt must constitute a CSR Committee of two directors only
  4. DIt is exempt from CSR Policy altogether

Explanation

Two per cent of Rs 20 crore is Rs 40 lakh. Section 135(9) says where the amount to be spent does not exceed fifty lakh rupees, the Committee requirement does not apply and the Board discharges its functions. The Policy and spending duties still remain, so exemption from the Policy is wrong.

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