CB BureauRebuffing rumours of the new government being lenient on the newly formed corporate social responsibility (CSR) law, interesting media bytes are coming in from senior officials. The government is taking a stern stand as it plans to formalize a penalty clause for companies who will not comply with Section 135 in Companies Act, 2013, for more than two years.
At present, the law only mandates reporting on CSR and states that if companies fail to spend the mandated sum towards social responsibility, they will have to explain the ‘why’ of it. However, the new rule in the offing will not only question the companies for failing to comply with the law, but will also penalize them for the same.
While there is no official information on the type of penalty, an official on the condition of anonymity has said that it will most likely be akin to penalties on non-compliance followed by other laws in the Companies Act. These include heavy financial penalties and even legal action against the board of directors.
While the penalty clause is at proposal stage, the government’s strict stance has already been conveyed by Minister of State for Corporate Affairs Nirmala Sitharaman. Replying to a question in Rajya Sabha, the minister said that the government was ‘keenly watching the companies and in case a company does not meet the norms, we will certainly ask for reasons.’ The minister stated that the government would keep a close watch on CSR spending of corporate groups and would check whether they were complying with the law as mandated in the new Companies Act.