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Business News/ Politics / Policy/  Government gets civil about CSR activities
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Government gets civil about CSR activities

CSR-related violations will be now considered a ‘civil liability’, instead of being treated as a ‘criminal offence’
  • Any changes in the provisions will require further amendments to the Companies (Amendment) Act
  • Finance Minister Nirmala Sitharaman, MoS for Finance Anurag Thakur, and finance secretary Rajiv Kumar during a press conference in New Delhi. (PTI)Premium
    Finance Minister Nirmala Sitharaman, MoS for Finance Anurag Thakur, and finance secretary Rajiv Kumar during a press conference in New Delhi. (PTI)

    NEW DELHI : In what may be a huge relief for companies, defaults on corporate social responsibility (CSR) obligations will not be treated as a criminal offence.

    Minister of finance and corporate affairs Nirmala Sitharaman on Friday said that corporate social responsibility-related violations will be considered a ‘civil liability’, instead of being treated as a ‘criminal offence’.

    “Ministry of corporate affairs will review the sections under the Companies Act. The government has provided companies, through revised orders, time for completing ongoing projects towards fulfilling their CSR obligations," she said.

    Any changes in the provisions will require further amendments to the Companies (Amendment) Act.

    According to the law, every company with a net worth of 500 crore or more, or sale of 1,000 crore or more, or net profit of 5 crore or more, in a fiscal year are required to spend at least 2% of their average net profit of the last three fiscal years on corporate social responsibility activities. It includes initiatives that would have social, economic and environmental impact, or a way to give back to the society.

    “Every doubt that was prevailing outside, I would like to dispel it today. There is no intention of the government to go on the prosecution route. Corporate social responsibility will only be treated as a civil matter and not at all as a criminal matter," Sitharaman said.

    The Companies (Amendment) Act, 2019, which got the President’s assent on 31 July, says that any unspent annual funds pertaining to corporate social responsibility should be transferred to a specified government fund within six months of the fiscal year. In case of ongoing corporate social responsibility projects, businesses have three years to utilize the funds allocated in a given year.

    The law proposes penal provisions that may include fine, or imprisonment, or both, to defaulting officers. Any violation will attract a fine of 50,000-250,000.

    “We are inclined to move from the prosecution route to more humane approach. The intention of the government, at no point, is to pursue anything in the name of prosecution," the minister added.

    Earlier in the month, Sitharman met industry representatives across key sectors, including automobile and banking, besides industry associations, to hear out their challenges and had promised to take necessary policy-based actions ‘fairly quickly’.

    Further, in a closed door interaction with the corporates earlier this month, Sitharaman has said the government would review the provision criminal penal provisions.

    Besides, the fact that the companies received corporate social responsibility notices with retrospective effect was unacceptable and she would put a stop to such notices.

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    Published: 23 Aug 2019, 11:00 PM IST
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