The Companies Act 2013 - Business & Economy - General Economy - TIK Share

The Companies Act 2013


Ranvir Sengupta

2014-05-19

The Indian Parliament amended the Companies Act in 2013 for the 1st time since its conception way back in 1956.

The Companies Act 2013 requires that one-third of a company’s board comprise independent directors, and that at least one board member be a woman. It also requires companies to disclose executive salaries as a ratio to the average employee’s salary, and it allows shareholders to file class-action law suits.

The provision that has gotten the most attention is the so-called “2 per cent” requirement, which made India the first country to mandate CSR.

CSR refers to Corporate Social Responsibility. Under the new Act each company must spend “at least 2 per cent of the average net profits of the company made during the three immediately preceding financial years” on “CSR” activities.

The requirement will apply to any company that is incorporated in India, whether it is domestic or a subsidiary of a foreign company, and which has (1) net worth of Rs. 5 billion or more (US$83 million), (2) turnover of Rs. 10 billion or more (US$160 million), or (3) net profit of Rs. 50 million or more (US$830,000) during any of the previous three financial years. This means that about 8,000 companies will spend a combined total of up to Rs. 150 billion (US$2 billion) annually on CSR activities.

Rahul Rai

2014-05-19

Hi Ranvir,
Can you explain the article in detail. Please edit and write further details on CSR.
Which companies need to follow CSR?
What if we dont invest in CSR?
Just got some doubts on it.

Reply