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CMA Final · Corporate and Economic Laws · Corporate Governance and Social Responsibility and Sustainability

Under the Companies Act, 2013, a company whose CSR obligation for a financial year is Rs 40 lakh and which has crossed the net worth, turnover or net profit threshold of section 135(1) is placed in which position regarding the CSR Committee?

The company need not constitute a CSR Committee because its required CSR spend of Rs 40 lakh does not exceed fifty lakh rupees. Under section 135(9), the Board of Directors then performs the functions of the Committee. The spending obligation under section 135(5) continues to apply.

  1. AIt must still constitute a CSR Committee of at least three directors including one independent director
  2. BIt need not constitute a CSR Committee, and the Board of Directors discharges the Committee's functionsCorrect
  3. CIt must constitute a CSR Committee of two directors only
  4. DIt is exempt from CSR spending altogether because the amount is small

Explanation

Section 135(9) says that where the amount to be spent under sub-section (5) does not exceed fifty lakh rupees, the requirement to constitute the CSR Committee does not apply and the Board discharges its functions. Rs 40 lakh is below that limit. The spending obligation itself is not removed, so the last option is wrong.

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