Under the Companies Act, 2013, the Corporate Social Responsibility (CSR) provisions under Section 135 are designed for companies that are profit-oriented and meet certain financial thresholds (net worth, turnover, or net profit). Section 8 companies, on the other hand, are established as not-for-profit entities with a primary objective of promoting social causes, art, science, research, or social welfare.

Key Points:

• Nature of Section 8 Companies:
  Section 8 companies are created to operate on a non-profit basis. Their main objective is to further social, charitable, or other public welfare causes, and they do not distribute profits to shareholders.

• CSR Applicability:
  The CSR provisions under Section 135 are applicable only to companies that meet certain financial thresholds (₹500 crores net worth, ₹1000 crores turnover, or ₹5 crores net profit) and are profit-making. Since Section 8 companies operate on a not-for-profit basis, they are not required to comply with CSR provisions.

• Reasoning:
  The intent behind CSR is to encourage profit-making companies to contribute to social welfare by setting aside a portion of their profits for CSR activities. Section 8 companies, being inherently non-profit, are already geared toward social causes and are thus exempt from these additional CSR obligations.

Conclusion:

CSR provisions under Section 135 of the Companies Act, 2013 do not apply to Section 8 companies because their primary focus is on social welfare and they operate on a not-for-profit basis.

Under Section 135 of the Companies Act, 2013, the Corporate Social Responsibility (CSR) provisions apply on a stand-alone basis to every company incorporated in India that meets the prescribed financial thresholds. This means:

• Each Company’s Individual Obligation:
  Whether it’s a holding company, a subsidiary, or any other corporate entity, the CSR requirements apply individually. Each company must evaluate its own financial criteria (net worth, turnover, or net profit) for CSR eligibility.

• No Automatic Transfer of CSR Responsibility:
  The CSR mandate does not automatically flow from a holding company to its subsidiaries (or vice versa). If a subsidiary meets the threshold, it must comply with CSR provisions even if the holding company does not—and the reverse is also true.

• Group Considerations:
  Even if companies are part of the same group, each entity is treated as a separate legal entity. Therefore, the CSR obligation is determined separately for each company.

When it comes to Corporate Social Responsibility (CSR), it’s important to distinguish between core business operations and activities undertaken for social welfare. Here’s what you need to know:

1. Core Business vs. CSR Expenditure

• Core Business Operations:
  If a corporate group is primarily engaged in running hospitals or educational institutions as part of its main business, the related expenditures are treated as regular business expenses.

  • Example:
    A company that operates a chain of hospitals for profit cannot count its operating costs as CSR expenditure because these expenses are integral to its business operations.

• CSR Activities:
  CSR expenditure is meant for activities that are not part of the regular business but are undertaken for the benefit of society.

  • Example:
    If a company donates funds to support an independent hospital or educational institution, or if it initiates additional projects in these sectors that go beyond its regular operations, such expenditure can qualify as CSR spending.

2. Alignment with CSR Guidelines

For any expenditure to be considered CSR:

• Purpose: It must align with the social welfare objectives specified in Schedule VII of the Companies Act, 2013.
• Distinct Activity: The CSR activity should be separate from the company’s routine business operations.
• Documentation: Proper records and board approvals must be maintained to demonstrate that the spending is directed toward social causes rather than profit-making.

Conclusion

• Not Considered CSR:
  Operating hospitals and educational institutions as part of a company’s primary business does not count as CSR expenditure.
• Potentially Considered CSR:
  If a company supports or donates to such institutions outside of its core operations—focusing on social welfare—it may be able to claim that expenditure as CSR, provided it meets the guidelines under Schedule VII.

By clearly separating core business activities from purely philanthropic initiatives, companies can ensure they comply with CSR requirements while maximizing their positive impact on society.

Under the Companies Act, 2013, the primary responsibility for signing financial statements lies with the Board of Directors. Here’s a comprehensive overview of who is required to sign and the roles of other key officers such as the CFO and Company Secretary:

1. Mandatory Signatures by the Board of Directors

• Directors’ Signatures:

  • Section 129 requires that the Balance Sheet, Profit & Loss Account, and other financial statements be signed on behalf of the Board of Directors.
  • Section 134 mandates that the accompanying Director’s Report is signed by the directors.
  • Depending on the company’s Articles of Association, if there is more than one director, at least two directors may be required to sign; if there is only one director, that director must sign.

• Auditor’s Signature:

  • The independent auditor must sign the auditor’s report attached to the financial statements.

2. Role of the CFO

• Involvement in Preparation:
  • The Chief Financial Officer (CFO) plays a key role in preparing and reviewing the financial statements.
• Signature Requirement:
  • The Companies Act does not specifically require the CFO to sign the financial statements unless the CFO is also a director or has been specifically designated as a signatory by the Board.

3. Role of the Company Secretary (CS)

• Ensuring Compliance:
  • The Company Secretary is crucial in ensuring that all statutory filings and compliance requirements are met, including the preparation and timely filing of the Annual Return and other statutory documents.
• Signature Requirement:
  • The CS is not mandated by the Act to sign the financial statements unless they are a director or are specifically authorized by the Board.

4. Digital Signatures and Record-Keeping

• Use of Digital Signatures:
  • Companies may use digital signatures to sign financial statements, provided they meet the regulatory standards set by the Ministry of Corporate Affairs.
• Documentation:
  • All signatures (whether physical or digital) certify that the financial statements represent a true and fair view of the company’s financial position.

Key Takeaways

• Directors are Primarily Responsible:
  • The financial statements must be signed by the Board of Directors and the independent auditor.
• CFO and CS Roles:
  • While the CFO and Company Secretary are critical to the preparation and compliance process, they are not required to sign the financial statements unless they hold a director position or are designated as signatories.
• Digital Compliance:
  • The use of digital signatures is acceptable as long as they adhere to the prescribed standards.