recall the debates in the lead up to the Companies Act, 2013 as to whether the
provisions relating to corporate social responsibility (CSR) ought to be mandatory
or voluntary. Finally, a compromise position was arrived at that largely
amounts to a “comply-or-explain” approach. Since the CSR provision (section
135) was brought into effect from April 1, 2014, its impact (particularly on
CSR spending) will be known only when companies begin reporting their
expenditure and other details in their annual reports for the financial year
ending March 31, 2015.
from the Government are that the CSR compliance will be closely monitored, both
at the individual company level and also on an overall basis. Towards this end,
the Ministry of Corporate Affairs earlier this month constituted a
committee to suggest measures for improved monitoring of the implementation
of the CSR policies by companies under section 135 of the Companies Act, 2013.
The terms of reference of the committee include suggesting measures for
adoption by companies for systematic monitoring of CSR initiatives, and also mechanisms
for providing feedback to the Government regarding efficacy of the CSR
expenditure and quality of compliance.
indicates that the Government continues to place considerable importance on CSR
measures. Although structured largely on a “comply-or-explain” basis, the
intention seems to be to ensure maximum compliance.