Yes, if a company has not completed its
three financial years since its inception but meets any of the criteria (mentioned
below) in section 135(1) of the Companies Act 2013, it needs to follow CSR
rules. For this, the company can spend at least 2% of its average net profits
of the previous financial years.
The company must meet any of the below
criteria for be eligible for CSR provisions:
(i) net worth of rupees five hundred
crore or more, or
(ii) turnover of rupees one thousand
crore or more, or
(iii) net profit of rupees five crore or
more.
Let’s understand this with an example:
Suppose, your company was established in
the FY2018-19. By 2020-2021, it has not completed its three financial years but
if qualifies any of the above-mentioned criteria, you must spend a minimum of 2
percent of your average net profits made during FY 2018-19 and FY 2019-2020
How can companies with small CSR
funds take up CSR activities in a project mode?
Answer- If your CSR project is well
thought out, a small budget shouldn’t be a limitation. Still, if you face any
issues with the limited funds, the Companies (CSR Policy) Rules, 2014 allows
companies to come together and combine their CSR funds to support CSR
activities.
Let us know in comments if you have any
more queries!