NEW DELHI: The corporate affairs ministry has given permission for penal action against 196 companies for violating CSR norms in 2014-15 fiscal, according to union minister P P Chaudhary.
Under the Companies Act, 2013, certain class of profitable entities are required to shell out at least two per cent of their three-year annual average net profit towards Corporate Social Responsibility (CSR) activities.
The centre government has given a nod for a suitable action against 196 companies who failed to spend two per cent of their annual average net profit on corporate social responsibility in the 2014-15 fiscal. Total 5,870 companies had spent around Rs 9,553.7 crore during the 2014-15 fiscal, while the number rose to Rs 13,625.24 crore in 2015-16. The number of companies who shell out on CSR in 2015-16 was 7,983.
As per the Companies Act, 2013, every company having net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more, during any financial year is required to form a CSR committee consisting of three or more directors, one of whom should be an independent director.
Minister of State for Corporate Affairs PP Chaudhary said on Tuesday that the Corporate Affairs Ministry had ordered penal action against the erring companies. “Till date, the ministry has accorded permission for penal action against 196 companies for financial year 2014- 15,” Chaudhary said in a written reply to Rajya Sabha. Two days ago, a government official had said there was a need for “little more nudging and prodding” to make companies more compliant towards the CSR spending, and indicated the violators are being watched by the government.
“There should be more appetite for compliance. We will certainly like to remind the non-compliant companies that you are not complying,” Corporate Affairs Secretary Injeti Srinivas said on Sunday.
As per the Act, in case a company fails to spend the specified amount, its board has to provide the specific reasons for the same in the board report. “The number of companies that are required to make CSR expenditure and who failed to spend any amount for the purpose for 2014-15 and 2015-16 are 8,924 and 10,547, respectively,” the minister said in a separate reply.
Chaudhary added action has been initiated against as many as 83 companies in the first nine months of the ongoing financial year for not resolving investors’ grievances.
Besides, action has been taken against 145 firms in 2016 -17 and 89 in 2015-16, as per the investors’ grievance data maintained by the corporate affairs ministry. The Companies Act mandates that every company having more than 1,000 shareholders, debenture holders, deposit holders and any other security holders shall constitute a ‘Stakeholders Relationship Committee’ to consider and resolve the grievances of the firm’s security holders. Besides, markets regulator Sebi has also taken action against such companies.
With the government pushing for a stronger law against corporate governance practices, erring companies could face more music in the time to come. The latest amendments to the Companies Act that have been approved by Parliament would also help in ensuring a stricter regulatory framework, and would also contribute towards the ease of doing business.
With PTI inputs
Cartoon Copy Right: India CSR Network & Cartoon Watch.