The section 135 of the Companies Act, 2013 makes it mandatory for certain class of companies to spend 2% of the profits on CSR. But there are also 1,000-odd multinational companies operating through their branches, offshore delivery centers etc. Therefore, people often ask whether the CSR Law applies to MNCs / Foreign Companies also.
Today is a landmark day for our nation as the new Companies Act 2013 makes it mandatory for certain companies to spend 2% of their average net profit of last three years on Corporate Social Responsibility (CSR). However, in spite of so much debate and discussions, there are several gaps in the new legislation.
As the CSR legislation is about to be formally introduced, it is surprising how several companies continue to criticize it. The two common questions being raised on this topic are: (1) The profit earned by a company is shareholders’ money. (2) We are already discharging our obligations by paying taxes to the government. So, isn’t our government abdicating its fundamental responsibilities? See my detailed analysis in this blog.