The Companies Act Amendment 2019

The Government of India has amended the Companies Act, 2013. The new Companies Act  Amendment bill 2019 was passed in both the Houses of Parliament, and past President's approval on the 31st of July, it became an Act within Section 135. 

Rules Till Now

·         Section 135(1): CSR rules mandate every company with a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, during any financial year has to constitute a CSR committee and has to spend 2% of the average net profit (PBT) over the last 3 financial years on certain CSR activities as mandated under Schedule VII of the Companies Act. It also states that every eligible company shall constitute CSR committee of the Board, consisting of 3 or more Directors, out of which at least one director shall be independent. 

·         Until now if the company failed to spend the stipulated amount, the Board members had to specify the reasons for not spending the amount in the CSR report.” Therefore, it was comply or explain. Under Section 135 (5): Board will have to spend at least 2% in every financial year. If not spent, they will have to report and specify the reasons for not spending the amount.

New Amendment - Section 135 (6)

·         After the amendment, every company is now entitled to explain the expenditure on CSR. If the amount is unspent during the one year window, the companies will have to transfer the money they fail to spend in that year to an “unspent Corporate Social Responsibility account”, from which they can draw within the next 3 years to spend on CSR activities. This transfer has to be done within 30 days of completion of the financial year, wherein the money was supposed to be spent. This special account has to be opened in a scheduled bank. If a company is still unable to spend the amount within that period of 3 years, it can transfer it to a govt fund specified in Schedule VII of the Companies Act, such as the PM's National Relief Fund, within a period of 30 days of the 3rd financial year-end, failing which fines and imprisonment clauses will be levied.

Fines and imprisonment clauses: Section 135 (7) 

·         The Amendment states that “if a company contravenes the provisions of sub-section (5) and (6) of Section 135, the Company shall be liable for fine, which is between Rs 50,000 to Rs 25 lakh. Officer of such company who is in default is liable for 3 years imprisonment or a fine between Rs 50,000 to Rs 5 lakh, or both.

About Fiinovation:-

Innovative Financial Advisors Pvt. Ltd. (Fiinovation) is a global consulting firm operating in multiple disciplines of the social development sector with emphasis on Corporate Social Responsibility (CSR) and Sustainability. Fiinovation offers end to end CSR consulting services and simplified solutions that has helped various corporations channelize their resources for the upliftment of community on societal, economic and ecological aspects in accordance to their CSR charter. Since 2008, Fiinovation has grown phenomenally and has made a benchmark in the sector through its service quality. It has been able to bridge the gap between businesses and communities through value-based CSR programmes in association with credible civil society organizations on pan India basis in the field of health, environment, education, and livelihood.