Explain Provisions of the Companies Act, 2013 regarding "Corporate Social Responsibility (CSR) spend".

The Companies Act, 2013 requires that every company with net worth of ₹500 crore or more, or turnover of ₹1000 crore or more, or net profit of ₹5 crore or more during any financial year will constitute a CSR committee. The CSR Rules state that every company, which ceases to be a company covered under the above criteria for three consecutive financial years, will not be required to (a) constitute the CSR, and (b) comply with other CSR related requirements, till the time it again meets the prescribed criteria. The Companies Act, 2013 requires that a company which meets the CSR applicability criteria should constitute a CSR committee comprising of three or more directors. The Companies Act, 2013 also states that out of these three directors, at least one director should be an independent director. The CSR Rules state that a non-listed public company or a private company, which is not required to appoint an independent director as per the Companies Act, 2013 / Directors' Appointment Rules, can have its CSR Committee without an independent director. Also, a private company having only two directors on its board can constitute the CSR Committee with the two directors. CSR Expenditure In accordance with Section 135(5) of the Companies Act, 2013, the Board of each company covered under the CSR requirement needs to ensure that the company spends, in every financial year, at least 2% of its average net profits made during the three immediately preceding financial years in pursuance of CSR policy. Neither the Companies Act, 2013 nor the CSR Rules prescribe any specific penal provision if a company fails to spend the 2% amount. However, the Board, in its report, needs to specify the reason for not spending the specified amount. Neither the Companies Act, 2013, nor the CSR Rules prescribe any specific penal provision if a company fails to spend the amount. Also, there does not appear to be any legal obligation on companies to make good of short spending of one year in the subsequent years.