India along with the entire world is in the middle of one of the worst slowdowns ever. The government bore cognizance of the fact and cleared 72 amendments to the companies act which included various sections that decriminalise offences and facilitates business owners to take decisions without fear thus boosting ease of doing business.
All companies with a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more are required to spend 2 per cent of their average profit of the previous three years on CSR activities every year.
Violation of CSR norms is also among the offences that have been decriminalised. The government had announced in August that it would not operationalise provisions of the Companies Act that included prison terms of up to three years for violations of CSR norms after receiving representations from industry.
Firms that have a mandatory spending obligation of below Rs 50 lakh under CSR law would no longer have to constitute CSR committees. “We will recategorize 23 offences out of 66 compoundable offences. And these 23 offences will be dealt under an in-house adjudicating framework. We are also doing away with 7 compoundable offences and limiting 11 compoundable offences to just penalty with no imprisonment. Also, five offences would be dealt with under an alternative framework,” finance minister Nirmala Sitharaman said after the Cabinet meeting.
According to sources, about 15,000 companies which have CSR obligation of less than Rs 50 lakh will be exempt from the requirement of setting up CSR panels. More than 20,000 companies have to meet CSR obligations every year and Rs 15,000 crore is spent annually under the CSR domain. Sitharaman said with respect to CSR spending, if a firm has an obligation of spending more than the mandated 2% spend in a year, then such firm would be allowed to carry it forward for the next 2 or 3 years.
“The priority is to decriminalise provisions in the Companies Act,” said Finance and Corporate Affairs Minister Nirmala Sitharaman. This move comes after a huge controversy that erupted last year when the government amended the Companies Act by adding a three-year imprisonment term for executives of any company which are in default of its CSR obligations. The new amendments will go a long way in allaying the fears of the industry and boost CSR spends.