Society established for CSR, can company avoid 3 year track record requirement if added as member

[Nishtha Jain]

A society was formed for CSR purposes. All shareholders and directors are members of this newly incorporated society. As per implementation Rules of Corporate Social Responsibility Rules, if a society is established by the company, it need not have to have the track record of at least 3 years.

In this case, if we amend the object clause(add incorporated for CSR purposes of the company), as well as add the company as a member of the society. Can this 3 years track record requirement be avoided? No PAN has been acquired and no registration under 80G/12A obtained yet. Society was registered on 7.07.026

[Sanjeev Agarwal]

The exemption from the 3-year track record under Rule 4 of the Companies (CSR Policy) Rules, 2014 is available only where the implementing agency is "established by the company" (or by the Central/State Government or along with other companies). An independent society must ordinarily have an established track record of at least three years in undertaking similar activities.

In the present case, the society was registered on 07.07.2026 with all shareholders/directors as members. However, the company itself was not a member at the time of incorporation, and the objects apparently did not state that the society was established for implementing the company's CSR activities.

Merely amending the object clause to include CSR implementation for the company and subsequently admitting the company as a member is, in itself, unlikely to qualify the society as one "established by the company." The expression "established by the company" is generally tested at the time of incorporation. A subsequent amendment cannot ordinarily alter the historical fact regarding who established the society.

The MCA is likely to examine the substance of the arrangement by reviewing the incorporation documents, founding members, Board resolutions, funding pattern and governance structure. If these documents indicate that the society was originally formed by individuals in their personal capacity, the exemption from the 3-year track record may not be available.

Further, irrespective of the track record issue, the society must also obtain PAN and the prescribed Income-tax registrations (12AB and 80G, as applicable) before it can function as an eligible CSR implementing agency.

A limited contrary argument may be available only if there is strong evidence that the society was, in substance, established pursuant to a prior Board resolution of the company, with the directors acting merely as nominees of the company. In the absence of such contemporaneous documentation, this position carries litigation risk.

Practical recommendation: Since the society has only recently been registered (07.07.2026), the most legally sustainable approach would be to evaluate the feasibility of incorporating a fresh society clearly established by the company from inception, with appropriate objects, Board approvals, PAN and tax registrations. This would provide a significantly stronger compliance position than attempting to cure the existing entity through post-incorporation amendments.

[Nishtha Jain]

Thank you for your through reply. The CSR policy rule also states that society must be established by the company singly or along with other companies. And a society must also have minimum 7 members. So can the new society be formed by the company and its directors or it has to be along with other companies only?

AI Summary

CSR implementing agency track record exemption depends on being established by the company, not later membership changes.
The CSR implementing agency track record exemption applies only where the society is genuinely established by the company or jointly with other companies, and an independent society ordinarily needs a three-year track record of similar activities. Later amendment of objects or admission of the company as a member will not usually convert a society originally formed by individuals into one established by the company; incorporation documents, founding members, Board resolutions, funding, and governance will be examined. PAN and the relevant income-tax registrations are also required before the society can function as an eligible CSR implementing agency.