Page 6 - 31. COMPILER QB - CSR

QUESTIONS FROM PAST EXAM PAPERS

Q5 (May 18 – 8 Marks)

What are the provisions of section 135 of the Companies Act, 2013 regarding the constitution of a Corporate
Social Responsibility (CSR) Committee. Also explain the role of the Corporate Social Responsibility (CSR)
Committee and Board.
XYZ Limited is a company which has net worth of Rs 250 crore. It manufactures parts for automobiles. The

sales of the company are affected due to low demand of the products. The previous year’s financial states of
company are as below:
(Rs in crore)
31st March 2018 (Current 31st March 2017 31st March 2016 31st March 2015
Year)
Net Profit 4.25 8.00 3.50 3.25
Turnover 500.00 900.00 400.00 350.00
Examine whether the company has an obligation to form a CSR committee since the applicability criteria is

not satisfied in the current financial year.
SOLUTION

As per section 135 of the Companies Act 2013
Every company having either
● 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 shall constitute a Corporate Social Responsibility (CSR) Committee of the Board

consisting of three or more directors (including at least one independent director).

B. Role of Corporate Social Responsibility (CSR) Committee
The CSR Committee shall formulate and recommend to Board-

a. CSR Policy indicating the activities to be undertaken by the company as specified in Schedule VII;
b. the amount of expenditure to be incurred on the above activities and
c. Monitor the CSR Policy of the company from time to time.

C. Role of Board
Board shall disclose-

a. The composition of CSR Committee in its report
b. Approve the recommended CSR Policy for the company
c. Disclose the contents of such Policy in its report and place it on the company's website
d. Ensure that the activities included in CSR Policy of the company are duly executed by the company
e. Ensure that the company spends, in every financial year, at least two percent of the average net profits of

the company made during the three immediately preceding financial years by giving preference to the local
area and areas around it where it operates
f. In case the company fails to spend such an amount, the Board shall specify the reasons for not spending
the amount.
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