Cos will have to disclose CSR contributions: MCA

The government today said it would be mandatory for corporates to disclose to shareholders whether they have made a contribution of 2% of net profit toward corporate social responsibility activities.

"We have made it mandatory for all corporates to disclose [CSR spend of 2% to shareholders]," Minister of State for Corporate Affairs RPN Singh told reporters here.

The Companies Bill, 2009, will retain the original provision which asks companies to earmark 2% of the average profit of the preceding three years for corporate social responsibility (CSR) activities, amid strong opposition from industry to the clause.

"What we are trying to do is making it sure that corporates have CSR as an important part of their agenda," Singh added.

Industry has been of the view they should be allowed to monitor implementation of CSR themselves without the government intervention.

While industry body FICCI said, "If this reported stance is of the Ministry of Corporate Affairs, then we are in agreement with this stance," another body, CII, said, "the law should not specify any amount to be spent on CSR activities. It should be left to the decision of the board."

The suggestion for earmarking a part of a company's profit for CSR was floated by the Parliamentary Standing Committee on Finance, which scrutinised the Companies Bill, 2009.

Subsequently, the MCA proposed that "every company having [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 a year] shall be required to formulate a CSR Policy... As may be approved and specified by the company."

"In case any such company does not have adequate profits or is not in a position to spend prescribed amount on CSR activities, the directors would be required to give suitable disclosure/reasons in their report to the members," the Bill says.

While PSUs whose net profit is less than Rs 100 crore have to contribute 3-5% of their income for CSR, PSUs with profits between Rs 100-500 crore would be required to earmark 2-3%.

In case of public sector companies earning a profit of Rs 500 crore and above, CSR spending should be between 0.5% and 2% of the net profit.