Corporate Social Responsibility is a strict legal mandate under Section 135 of the Companies Act, 2013, read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. It creates a structured framework through which companies contribute to social and environmental development. This framework should be followed by entities to become socially responsible, along with creating profits. It should be followed by entities to become socially responsible, along with earning profits. These rules dictate who must spend, how they must govern that spending, and who is responsible for the oversight.
Applicability of CSR Provisions
Under Section 135(1), CSR provisions apply to every company, including its holding, subsidiary, and foreign companies (having a branch or project office in India), if it meets any one of the following prescribed financial thresholds in the immediately preceding financial year:
- Net worth of ₹500 crore or more
- Turnover of ₹1,000 crore or more
- Net profit of ₹5 crore or more
The law does not require all conditions to be satisfied together. Meeting any one of these thresholds is sufficient. This ensures that companies with significant financial capacity participate in CSR activities. Furthermore, as per Rule 3(2), once a company meets these criteria, it must comply with CSR norms until it ceases to meet them for three consecutive financial years.
Applicability of the CSR Committee
Once CSR provisions become applicable, the requirement to constitute a CSR Committee depends entirely on the quantum of the annual CSR obligation, as per the relief provided under Section 135(9).
Case 1: CSR Obligation exceeds ₹50 lakh
If the calculated CSR expenditure (2% of average net profits) is more than ₹50 lakh, the company must constitute a CSR Committee of the Board. This committee acts as the specialised body for CSR governance.
Case 2: CSR Obligation does not exceed ₹50 lakh
There is a relief for companies with smaller obligations. If the amount does not exceed ₹50 lakh, the company is not required to constitute a CSR Committee. In such cases, the Board of Directors shall itself discharge all the functions of the committee, including formulating the policy, recommending expenditures, and monitoring activities.
Composition and Structure of the Committee
Section 135(1) governs the structure of the CSR Committee. Typically, this body is composed of at least three directors, one of whom must be an Independent Director. However, the law provides flexibility under the CSR Rules:
- Private companies with only two directors on their Board shall constitute the committee with those two directors and do not require an Independent Director.
- Unlisted public companies that are not required to appoint an Independent Director under Section 149(4) can form the committee without one.
- Foreign companies shall have a committee comprising at least two persons, one of whom is the authorised representative in India.
The idea is to allow flexibility while maintaining a high standard of corporate governance.
Meetings and Quorum of the Committee
While the Companies Act does not prescribe a fixed number of meetings for the CSR Committee, the Secretarial Standards (SS-1) generally guide the procedural aspects. Companies meet whenever there is a need to approve new CSR projects. They also meet to review the implementation of ongoing projects or to monitor the spending of the allocated budget. This flexible approach allows companies to align meetings with project cycles and operational needs.
The law also does not specify a quorum for these meetings. Generally, the quorum is governed by the board-approved policies of the company. In many cases, companies follow the Secretarial Standards to ensure everything is in order. So, companies essentially define their own quorum requirements to suit their internal governance needs.
Roles and Responsibilities
The CSR Committee under section 135(3) and Rule 5 plays a central role in ensuring that CSR activities are structured, compliant, and aligned with other statutory requirements. Its key responsibilities include formulating and recommending a CSR Policy to the board, identifying and recommending CSR projects and activities, recommending the amount of CSR expenditure, monitoring implementation of CSR initiatives, ensuring alignment with Schedule VII of the Companies Act, tracking CSR spending, including the 2% requirement and ensuring proper disclosures in the Board’s Report
The Committee operates as the governance layer for CSR. It translates statutory requirements into actionable plans and ensures that execution remains within the compliance framework. In simple terms, the CSR Committee ensures that companies give back to society in a structured and compliant manner.
Role of the Company Secretary
The Company Secretary (CS) supports the framework under Section 205, ensuring compliance and coordination. The CS organises and convenes the CSR meetings and ensures the company complies with the provisions of the Act and the CSR Rules.
The CS assists the committee in drafting the CSR Policy. They maintain all proper documentation and the minutes of the meetings. This is important because CSR is a highly audited area. The CS also tracks the expenditure and the necessary disclosures. They coordinate between the management and the committee to ensure everyone is on the same page. The Company Secretary ensures CSR activities are not just impactful, but also compliant.
The CSR framework in India is built on the pillars of transparency and accountability. The CSR Committee ensures that companies contribute to social and environmental development. It focuses on the policy, the spending, and the constant monitoring of results. And the Company Secretary ensures smooth implementation and compliance. Through this structured approach, the law turns corporate profits into social progress.