CB BureauThe government has issued preliminary notices to 272 companies for not complying with the CSR spending rules as mandated by the 2013 Companies Act. The government has been examining the CSR spend of the top 1,000 companies that have spent less than 2 per cent of their profits, starting with FY 2016. This work has been taken up by centralised scrutiny and prosecution mechanism (CSPM). The ministry of corporate affairs (MCA) has sent scrutiny letters to the erring companies and based on this, 272 preliminary notices have been sent out for non-compliance with the law and failing to furnish reasons for not spending or under-spending. As per reports, more notices will be issued shortly. As per standard process, the Registrar of Companies initiates action against non-compliant companies after the required investigation.
This is part of the government’s change in approach towards erring companies, from ‘comply or explain’ to ‘comply or get prosecuted’. Until now, the MCA was taking up cases only against those companies that failed to explain in their annual report the reasons for not spending the mandated amount, but now this will no longer be enough to escape prosecution. Earlier this year, it was reported that the MCA was going to send showcause notices to companies that had failed to spend the required amount.
For FY 2015, prosecutions against 254 companies were sanctioned. In the April”November period of FY 2017, 2,203 firms spent more than the prescribed amount towards CSR, while 3,718 companies spent less and 346 firms were yet to contribute anything.