India to Mandate Corporate Social Responsibility Spending

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Courtesy of SGS

India becomes one of the first countries in the world to mandate Corporate Social Responsibility (CSR) spending under the statuary provision of the Companies Act, 2013.

This Act primarily regulates incorporation of a company, responsibilities of a company, directors, and dissolution of a company. The revised Act partially replaces The Companies Act, 1956 and after receiving the assent of the President of India on 29 August 2013, came into force on 12 September 2013. However, on 27 February 2014, the MCA (Ministry of Corporate Affairs) stated that Section 135 of the Act which deals with corporate social responsibility would come into effect from 1 April 2014. This Section is applicable for every company having a net worth of rupees five hundred crore or more (i.e. $80 million or more), or a turnover of rupees one thousand crore or more (i.e. $160 million or more), or a net profit of rupees five crore or more ($800 thousand or more). Under this provision, most importantly and significantly, the companies are to mandatorily spend 2% of the average net profits of the company made during the three immediately preceding financial years in pursuance of the CSR policy.

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