The lower house of the Parliament on Friday approved a bill that seeks to tighten CSR norms and ensure stricter action for non- compliance of the company law regulations.
Piloting the Companies Amendment Bill 2019, finance minister Nirmala Sitharaman said that companies not spending the mandatory 2 percent of their profit on Corporate Social Responsibility (CSR) activites for a total period of four years will be required to deposit the amount in a special account.
Under the Act, companies earning profit of over Rs 5 crore, turnover of Rs 100 crore or networth of more than Rs 500 crore are required to shell out at least two percent of their three-year annual average net profit towards CSR activities. Sitharaman also said that India would become the first country to make CSR spending mandatory through a law.
The companies will have one year to firm up the CSR proposal and another three years to spend funds.
In case money remains unspent for one plus three years, the money will have to be moved to an escrow account, she said, adding it could even be the Prime Minister's Relief Fund.
Further, amendements to the Companies Act were made to improve ease of doing business and also reducing compliance burden on the companies, especially the smaller ones, she said.
The bill empowers the Registrar of Companies (ROC) to initiate action for removal of the name of the company from Register of companies if it is not carrying on any business or operation in according with the company law.
Responding to the concerns of members on shell companies, Sitharaman said the word "shell companies" has not been defined in the rule book, but it is loosely referred to inactive companies or those which do not maintain a registered office.
It was informed to the Lok Sabha on Friday that four lakh companies were identified and de-registered for non-maintenance of registered office.
With Inputs From PTI