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The Companies (Corporate Social Responsibility Policy) Rules, 2014
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....he Companies (Corporate Social Responsibility Policy) Rules, 2014<br>By: - YAGAY andSUN<br>Corporate Laws / IBC / SEBI<br>Dated:- 7-6-2025<br>The Companies (Corporate Social Responsibility Policy) Rules, 2014 were introduced by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013 to give effect to Section 135 of the Act, which mandates that certain companies must formulate and implement a Corporate Social Responsibility (CSR) policy. These rules lay down the framework for companies to define their CSR objectives, allocate resources, and track their CSR activities and compliance. The rules provide specific guidelines for determining eligibility, setting CSR priorities, and ensuring accountability in the implementation of CS....
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....R programs. These rules also set the criteria for how companies should report on their CSR activities and ensure that the expenditure is made in compliance with the prescribed legal provisions. Key Provisions of The Companies (Corporate Social Responsibility Policy) Rules, 2014 1. Applicability of CSR Rules The CSR provisions under Section 135 of the Companies Act, 2013 and the CSR Rules, 2014 apply to companies that meet the following criteria: * Net Worth: Companies with a net worth of Rs.500 crores or more. * Turnover: Companies with an annual turnover of Rs.1,000 crores or more. * Net Profit: Companies having an annual net profit of Rs.5 crores or more during any financial year. Such companies are required to establish a CSR p....
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....olicy and spend a specified percentage of their profits on eligible CSR activities. 2. Formation of CSR Committee 2.1. CSR Committee * CSR Committee: Every company that is required to comply with the CSR provisions must constitute a Corporate Social Responsibility Committee. * Composition: The CSR Committee should consist of at least three directors, with at least one independent director (for listed companies or those with a prescribed net worth, turnover, or profit). 2.2. Role of CSR Committee The CSR Committee is responsible for: * Formulating and recommending a CSR policy to the board of directors. * Recommending the amount of expenditure to be incurred on CSR activities. * Monitoring the implementation of CSR projects and....
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.... ensuring compliance. 3. Corporate Social Responsibility Policy 3.1. Formulation of CSR Policy * The company is required to formulate a CSR Policy that outlines its approach to CSR, including the focus areas and the strategies to achieve them. * The policy must also indicate how the CSR activities align with the Schedule VII of the Companies Act, 2013, which specifies eligible CSR activities. 3.2. Approval by the Board * The CSR policy must be approved by the Board of Directors of the company. * The policy must then be disclosed on the company's website (if applicable) and should be made available to shareholders. 3.3. Areas of CSR Activity The CSR policy should focus on activities specified in Schedule VII of the Companies Act....
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...., 2013, which include: * Eradicating hunger, poverty, and malnutrition. * Promoting education, including special education. * Promoting gender equality, empowerment of women, and ensuring environmental sustainability. * Ensuring the health and well-being of individuals, including sanitation. * Support for the protection of national heritage, art, and culture. * Promoting sports, rural development, and disaster management. The company may choose one or more of these areas to focus on, based on its resources, expertise, and operational geography. 4. CSR Expenditure 4.1. Minimum CSR Spend * Companies falling under the CSR criteria are mandated to spend at least 2% of their average net profits of the preceding three years on CS....
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....R activities. 4.2. CSR Activities and Projects * The CSR expenditure must be used on approved CSR projects, which should align with the CSR policy and be in accordance with Schedule VII of the Companies Act, 2013. * CSR funds cannot be used for the company's own benefits, such as administrative costs or routine business operations. 4.3. Impact Assessment * Companies with CSR spending of Rs.10 crore or more on CSR activities in a financial year are required to conduct an impact assessment of their CSR projects to assess the effectiveness of their programs. 5. Reporting and Disclosure 5.1. Annual Reporting * Companies are required to disclose their CSR activities annually in their Board Report. * The report should include: * ....
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....A detailed account of the CSR policy and the activities carried out during the year. * The amount of money spent on each CSR activity. * A summary of any impact assessments done for significant CSR projects. 5.2. CSR Information on the Website * Companies are also encouraged to place their CSR Policy and annual reports on their official website for easy access to the public and stakeholders. 6. Compliance Mechanism 6.1. Monitoring and Review of CSR Activities * The CSR Committee is responsible for monitoring the progress of CSR projects. * Companies are required to review their CSR policy at regular intervals to ensure its relevance and effectiveness in achieving the intended outcomes. 6.2. Non-compliance with CSR Spend * If....
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.... a company does not spend the prescribed 2% of its average net profits on CSR activities, it must provide an explanation for the shortfall in its annual report. * The company must state the reasons for not fulfilling its CSR obligations and outline how it plans to meet them in the future. 6.3. Penalties for Non-compliance * Penalties for non-compliance may include: * Fines of up to Rs.1 crore for the company and up to Rs.5 lakh for every officer of the company who is in default. * The company could also face penalties if it fails to comply with the CSR expenditure or fails to explain the reasons for non-spending. 7. CSR Contribution to Other Entities * Companies can contribute to NGOs, charitable trusts, or other entities that ....
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....have a legitimate purpose and comply with CSR regulations. * However, the contribution should be made for eligible activities under Schedule VII. 8. CSR in Group Companies * If a company is part of a group of companies, the CSR policy and spend can be coordinated at the group level, but each company must make its own contribution to CSR. * Group companies can pool resources for joint CSR initiatives, but it should still be ensured that each company meets the required 2% threshold. 9. Conclusion The Companies (Corporate Social Responsibility Policy) Rules, 2014 establish a strong framework for promoting responsible corporate behavior in India. They encourage companies to contribute positively to society by addressing critical issues....
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.... such as poverty, education, health, and environmental sustainability. By mandating a formalized approach to CSR, these rules ensure that companies take a structured and accountable approach to social responsibility. The CSR committee plays a vital role in steering the company's CSR activities, ensuring the effective allocation of resources, and tracking the impact of CSR initiatives. In conclusion, the CSR provisions in the Companies Act, 2013, as supplemented by the CSR Rules, 2014, offer a significant opportunity for companies to contribute towards nation-building and sustainable development. However, compliance with these rules and spending the required amount on eligible CSR activities are crucial to maintaining good corporate govern....
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....ance and enhancing the company's reputation in the eyes of stakeholders and society.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....