CSR norms: Corp Affairs Min puts in place centralised scrutiny mechanism

P P Chaudhary, Union Minister of state for corporate affairs | File photo

The Corporate Affairs Ministry has put in place a centralised scrutiny and prosecution mechanism to keep a tab on enforcement of CSR provisions under the companies law, according to Union Minister P P Chaudhary.

Under the Companies Act, 2013, certain class of profitable entities are required to shell out at least two per cent of their three-year annual average net profit towards Corporate Social Responsibility (CSR) activities.

Chaudhary on Tuesday told the Rajya Sabha that whenever violation of CSR provision is reported, the Registrar of Companies (RoC) initiates action against the company concerned after due examination of records.

"For financial year 2014-15, prosecution against 254 companies were sanctioned, out of which 33 companies filed application for compounding.

"In addition to this, the ministry has established Centralised Scrutiny and Prosecution Mechanism in April 2018 for the financial year 2015-16 onwards on pilot basis for enforcement of CSR provisions," the Minister of State for Corporate Affairs P P Chaudhary said in a written reply.

Replyinig to a query on whether the government would soon come out with a definition for shell companies, he said a task force has identified typical attributes of a 'shell company' which is prone to indulge in illegal activities.

A Special Task Force, co-chaired by Revenue and Corporate Affairs Secretaries, has been constituted to look into the matter of shell companies.

According to the minister, shell companies, in common parlance, refer to those entities which are not necessarily illegal but are very often used for illegal purposes such as tax evasion, money laundering, misusing bank loans and falsification of financial statements.

To another question, the minister said that as on date, no decision has been taken to bring all shares of unlisted companies from "non-demat mode to demat-mode".

Demat refers to dematerialised form.