Govt issues show cause notice to 536 firms

New Delhi: Government today said show cause notices have been issued to 536 firms for non-compliance with CSR norms under the companies law. 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 in a particular fiscal.

In case of non-spending, the company concerned has to provide explanation to the Ministry. "Show cause notices have been issued by Registrars of Companies to 536 companies for non-compliance of Section 135 read with Section 134 (3) of the Companies Act, 2013," Minister of State for Corporate Affairs Arjun Ram Meghwal said in a written reply to the Rajya Sabha.

Section 135 pertains to CSR works and the norm came into effect from April 1, 2014. In the last financial year, a total of 5,097 companies incurred a CSR expenditure of Rs 9,822.30 crore.

As many as 12,431 firms together have shelled out over Rs 18,625 crore CSR activities in the last two financial years. These figures are based on the number of companies for which data has been compiled by the Ministry.

To a query on whether there has been any structured study about the impact of the CSR norms, the Minister replied in the negative. Companies having a net worth of at least Rs 500 crore, turnover of Rs 1,000 crore or more as well as those with a minimum net profit of Rs 5 crore in a financial year are required to comply with CSR norm.

Such companies have to spend "in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years," towards CSR works, as per Section 135 of the Companies Act.

They also have to constitute a CSR committee of the respective board of directors and this panel would formulate and recommend to the board CSR activities that can be taken up by the company.