Corporate Social Responsibility & secretarial audit Applicability of CSR

Every Mumbaikar has seen a company's name on a school bench, a hospital ward or a cleaned-up beach stretch. Some of that is goodwill, but for big companies part of it is a legal duty. Section 135 of the Companies Act makes certain companies set up a committee, adopt a policy and spend a fixed share of their profit on social causes, or else explain why they did not. The questions for this topic are: which companies are caught, who decides what, how much must be spent, and what happens to money that is left over. Alongside it sits a quieter compliance tool, the secretarial audit, which checks whether the company has followed the law at all.

In two minutes

Section 135 requires a company that crosses any one of three financial limits (net worth, turnover or net profit) to form a CSR Committee, adopt a CSR Policy confined to Schedule VII subjects, spend at least two per cent of its three-year average net profit, and report the result; section 204 separately requires a secretarial audit report from a company secretary in practice for listed and prescribed companies.

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