TITLE OF THE CHECKLIST: Companies under CSR Obligation

Sr No PARTICULARSYESNOSection/Rule NoREMARKS
1Obtain thfollowing particulars based on the last audited financial statements of the Company, its Holding Companies and subsidiary companies located in India (“the group”):
a)          Net worth
b)          Turnover
c)          Net profit
2Based on the evaluation as per 1 above, does any of the companies in the group satisfy any one of the following criteria
a)  Net worth of Rs. 500 crores or more; or
b)   Turnover of Rs. 1,000 crores or more; or
c)          Net profit of Rs. 5 crores or more
Section 135(1) read with Rule 3(1)
3If the answer to 2 above is in the affirmative, the Company would be required to comply with the various provisions as discussed in the subsequent sections regarding CSR obligations
NB:.
1.          The net profit would need to be computed as discussed mentioned below in Note.
2.          The aforesaid provisions would also apply to foreign companies which are registered in pursuance of Chapter XXII (w.r.t. Companies Incorporated Outside India)
If a company becomes eligible based on 2 and 3 above for the first time, an evaluation would have to be done subsequently for the following three financial years and only if it ceases to fulfil the criteria for 3 consecutive financial years, the CSR obligations would cease.Rule 3(2) of Companies (Corporate Social Responsibility Policy) Rules, 2014 - Every company which ceases to be a company covered under sub-section (1) of section 135 of the Act for three consecutive financial years shall not be required to –
(a) constitute a CSR Committee; and
(b) comply with the provisions contained in sub-section (2) to (5) of the said section,
till such time it meets the criteria specified in sub-section (1) of section 135.

 


Note: Sec 135 (1) read with Rule 3(1)

Section 135(1) -
(1) Every company having net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more or a net profit of Rs.5 crore or more during any F.Y. shall constitute a Corporate Social Responsibility Committee of the Board consisting of 3 or more directors, out of which at least 1 director shall be an independent director.
Rule 3(1) of Companies (Corporate Social Responsibility Policy) Rules, 2014 –
Every company including its holding or subsidiary, and a foreign company defined under section 2(42) of the Act having its branch office or project office in India which fulfils the criteria specified in section 135(1) of the Act shall comply with the provisions of section 135 of the Act and these rules:Provided that net worth, turnover or net profit of a foreign company shall be computed in accordance with balance sheet and profit and loss account of such company prepared in accordance with the provisions of clause (a) of sub-section (1) of section 381 and section 198 of the Act.
As per Sec 2(57) – Net worth means the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation;
NW = (Paid Up Share Capital + All Reserves Created Out of Profits + Securities Premium Account) – (Accumulated Losses + Deferred Expenditure and Miscellaneous Expenditure not Written Off)
As per Sec 2(91) – “Turnover” means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year;
Rule 2(f) of Co.s CSR Rules, “Net profit” means the net profit of a company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following namely:-
(i) Any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; &
(ii) Any dividend received from other companies in India, which are covered under & complying with the provisions of section 135 of the Act:
Provided that net profit in respect of a financial year for which the relevant financial statements were prepared in accordance with the provisions of the Companies Act, 1956 (1 of 1956) shall not be required to be re-calculated in accordance with the provisions of the Act:
Provided further that in case of a foreign company covered under these rules, net profit means the net profit of such company as per profit & loss account prepared in terms of clause (a) of sub-section (1) of section 381 read with section 198 of the Act.

 


TITLE OF THE CHECKLIST:  Constitution of CSR Committee

Sr No PARTICULARSYESNOSection/Rule NoREMARKS
1Does the Company meet the criteria as per 2 of Companies Under CSR Obligation Checklist?
a)          Net worth
b)          Turnover
c)          Net profit
2If the answer to 1 above is in the affirmative, obtain and file the certified copy of the resolution passed by the Board of Directors to constitute a CSR Committee.
a)  Net worth of Rs. 500 crores or more; or
b)   Turnover of Rs. 1,000 crores or more; or
c)          Net profit of Rs. 5 crores or more
Section 135(1) -
Every company having net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more or a net profit of Rs.5 crore or more during any F.Y. shall constitute a Corporate Social Responsibility Committee of the Board consisting of 3 or more directors, out of which at least 1 director shall be an independent directors.
3Verify the details of the above with the minutes of the Board meeting.
NB:.
1.          The net profit would need to be computed as discussed mentioned below in Note.
2.          The aforesaid provisions would also apply to foreign companies which are registered in pursuance of Chapter XXII (w.r.t. Companies Incorporated Outside India)
Obtain and file a certified copy of the names of the CSR Committee members and confirm the same with the Board Resolution as per 2 above.Rule 3(2) of Companies (Corporate Social Responsibility Policy) Rules, 2014 - Every company which ceases to be a company covered under sub-section (1) of section 135 of the Act for three consecutive financial years shall not be required to –
(a) constitute a CSR Committee; and
(b) comply with the provisions contained in sub-section (2) to (5) of the said section,
till such time it meets the criteria specified in sub-section (1) of section 135.
Ensure that the committee complies with the following requirements:
a) It has at least 3 directors including 1 independent director in case of listed companies and prescribed unlisted public companies (i.e. those requiring independent directors)
b) At least 3 directors in case of other unlisted public companies and private companies having 3 or more directors.
c) Both the directors in case of a private company having only 2 directors
Rule 5
Obtain and file a certified copy of the terms of reference of the CSR committee and ensure that it contains the following minimum requirements, amongst others:
a)  To formulate and recommend to the Board the CSR Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule VII
b) To recommend the amount of expenditure to be incurred on the above activities.
c) To monitor the CSR Policy periodically.
Section 135(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 as 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.

Note: Rule 5 of Companies (Corporate Social Responsibility Policy) Rules, 2014

(1) The companies mentioned in the rule 3 shall constitute CSR Committee as under –

(i) an unlisted public company or a private company covered under sub-section (1) of section 135 which is not required to appoint an independent director pursuant to sub-section (4) of section 149 of the Act, shall have its CSR Committee without such director;

(ii) a private company having only 2 directors on its Board shall constitute its CSR Committee with 2 such directors;

(iii) with respect to a foreign company covered under these rules, the CSR Committee shall comprise of at least 2 persons of which one person shall be as specified under clause (d) of sub-section (1) of section 380 of the Act and another person shall be nominated by the foreign company.

(2) The CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.



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