The new section 135 introduced in the Companies Act, 2013 makes it mandatory for certain class of companies to spend 2% of the profits on CSR. However, given there are some 1000-odd multinational companies operating out of India through their branches, offshore delivery centers etc, people often ask this question.
Does 2% CSR Law Apply to MNCs / Foreign Companies
The answer is YES, as explained below. Here is the compilation of relevant sections of the Companies Act, 2013 as well as the Companies (Corporate Social Responsibility Policy) Rules, 2014.
Clause 3 (1) of CSR Rules: Corporate Social Responsibility
Every company including its holding or subsidiary, and a foreign company defined under Section 2 (clause 42) of the Act having its branch office or project office in India which fulfills the criteria specified in section 135 (1) of the Act shall comply with the provisions of section 135 of the Act and these rules.
Section 2 (clause 42) of the Indian Companies Act, 2013
“Foreign company” means any company or body corporate incorporated outside India which —
- has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
- conducts any business activity in India in any other manner.