Union Finance Minister Nirmala Sitharaman said companies will now have to explain where they have spent money allocated for corporate social responsibility (CSR) while adding that the companies have to move this money to an escrow account if not spent.
"Companies will now have to explain where they have spent the CSR money. We are giving a three-year window after which they will have to move the CSR money to an escrow account if they don''t spend it," Ms Sitharaman said while replying to the debate on Companies (Amendment) Bill, 2019 in the Rajya Sabha.
"Section 135 is being amended to provide for a specific penal provision in case of non-compliance of CSR," she said.
Ms Sitharaman said that the government is strengthening the enforcement provisions that enable the Serious Fraud Investigation Office (SFIO) to ensure speedy and more effective enforcement, including actions of disgorgement.
The Finance Minister further said, "Breach of ceiling on directorship is being made a ground for disqualification. For instance, if the numbers are crossed for holding the directorship beyond the permissible limit, it will bring in disqualification."
"Even before you start the function, it is necessary for the company to declare before the commencement of business," she said.
Ms Sitharaman further emphasised that the government is trying to bring in ease of doing business.
"Gandhiji''s trusteeship principle is with which profit-making cannot be devoid of social responsibility. The amendments we are bringing now are only to sharp focus that and make it far more effective... Here is a Companies Act that is undergoing major changes. We are trying to bring in ease of doing business, bringing in a robust framework through which the Companies Act can be implemented," she said.
"We are declogging the NCLT by shifting routine matters out of that. We are also trying to rationalise and recategorise minor offences for civil defaults," she added.
The Finance Minister said that it has become mandatory for companies to have a physical address. "Physical register is to be maintained so that people can go and check them and there is a veracity of their claims," she said.
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