A section-8 company is a kind of NGO that works only with the objective of social welfare, to serve the society or unprivileged people or for the development of any section or class of society or work for the protection of the environment. It is registered under the companies act with the Ministry of Corporate Affairs (MCA).
A section 8 company is registered online without any physical visit to the government office. The process to get the certificate is completely online.
What is CSR?
CSR means Corporate Social Responsibility under which some specified company has to contribute some portion of the profit towards the society for its development or promotion.
As per Section 135 of the Companies Act, 2013 every company having:
- Net Worth rupees 500 crore’s or more; or
- Turnover rupees 1000 crore’s or more; or
- Net Profit rupees 5 crore’s or more;
[During immediately preceding financial year] shall constitute a Corporate Social Responsibility Committee of the board consisting of 3 or more director out of which one director shall be an independent director.
Provided that this condition is not applicable to those companies which don’t need to appoint an independent director and have only 2 directors on the board then these companies can constitute a CSR committee with 2 directors only without an independent director.
As per section 135(5) of the companies act, 2013 the board of every company shall ensure that the company spends at least 2% of the average net profits of the company made during the three immediately preceding financial year (or less than 3 years where the company has not completed 3 years from its incorporation, during such immediately preceding financial year) in pursuance of its CSR policy in every financial year.
The company has to do the activities in the area or specified in Schedule VII whether itself or through any trust, society, NGO, or through Section-8 company.
Is CSR Applicable On The Section-8 Company?
As per above, it is said that every company has to frame this CSR committee which looks into the spending amount towards the CSR and every company means the company registered under the companies act, whether it is a private limited company or public limited or foreign company or section-8 company or Nidhi company but this is not applicable on One Person Company.
Although the main object of the company is to do charity for the society, not for the benefit of the members and not to earn any income from the company still this section applies to a section-8 company and a section-8 company also has to do CSR when it is applicable.
All those companies which fall under section-135 of the company’s act should contribute their profit towards the welfare of the society firstly it should give preference to its local area where the company is operating its business. The company can do the welfare by itself or it can contribute the fund to the companies which are incorporated with the objective of social welfare, but the committee shall take all the documents and record in respect of such contribution.
Any benefit provided to the employee of the company doesn’t amount to CSR. CSR should only be used for the promotion, protection, development of society or environment, education or sports etc. which should be mentioned in the MOA of the company.
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