Sections 135 and 136 of Companies Act 2013: CSR and Right to Financial Statements

Section 135 of the Companies Act, 2013 creates the statutory framework for Corporate Social Responsibility (CSR) for companies crossing the prescribed financial thresholds. Section 136 deals with circulation, website availability and inspection of financial statements and related documents by members and other entitled persons.

Section 135 - Corporate Social Responsibility

Meaning: Corporate Social Responsibility under the CSR Rules means activities undertaken by a company in pursuance of its statutory obligation under Section 135, subject to the inclusions and exclusions prescribed by the Companies (Corporate Social Responsibility Policy) Rules, 2014. Eligible CSR activities are linked to the areas or subjects specified in Schedule VII of the Companies Act, 2013.

When does Section 135 apply?

Section 135 applies where a company has, during the immediately preceding financial year, any one of the following:

Subject to the Act and CSR Rules, a covered company is required to comply with the CSR governance, disclosure and spending framework. The CSR Committee generally formulates and recommends the CSR Policy and expenditure and monitors the policy.

Functions of the CSR Committee and Board

The CSR Committee recommends the CSR Policy, recommends expenditure on CSR activities and monitors the policy. The Board considers the Committee's recommendations, approves and discloses the CSR Policy as required, and ensures that the approved CSR activities are undertaken.

Minimum CSR spending

The Board must ensure that the company spends at least 2 per cent of the average net profits made during the three immediately preceding financial years. If the company has not completed three financial years since incorporation, the calculation is based on the immediately preceding financial years available. For Section 135, "net profit" is calculated in accordance with Section 198, subject to the exclusions prescribed by law.

The Act states that preference should be given to the local area and areas around the place where the company operates for CSR spending. CSR expenditure must also comply with the CSR Rules and Schedule VII.

Unspent CSR amount not relating to an ongoing project

If the required CSR amount remains unspent and does not relate to an ongoing project under Section 135(6), the Board must state the reasons in its report and the unspent amount is required to be transferred to a Fund specified in Schedule VII within six months from the end of the financial year, subject to the statutory provisions.

Unspent amount relating to an ongoing project

For an ongoing project, the unspent amount must be transferred within 30 days from the end of the financial year to a special bank account called the Unspent Corporate Social Responsibility Account. The amount is to be spent for the CSR obligation within three financial years from the date of transfer. If it remains unspent after that period, it must be transferred to a Fund specified in Schedule VII within the time prescribed by Section 135(6).

Excess CSR spending and set-off

Where a company spends more than the amount required under Section 135(5), the excess may be set off against the CSR spending requirement of succeeding financial years in the manner and subject to the conditions prescribed by the CSR Rules.

Penalty for failure to transfer unspent CSR amount

Section 135(7) provides monetary penalties for default in complying with the transfer requirements under Section 135(5) or Section 135(6). The company may be liable to a penalty of twice the amount required to be transferred or Rs. 1 crore, whichever is less. Every officer in default may be liable to one-tenth of the amount required to be transferred or Rs. 2 lakh, whichever is less.

Implementation of CSR activities

The CSR Rules permit the company to undertake CSR itself or through eligible implementing entities. The 2022 amendment refined the categories of eligible implementing entities, including specified Section 8 companies, registered public trusts, registered societies, government-established entities and statutory bodies, subject to the conditions in the Rules.

Impact assessment and CSR reporting

The CSR Rules prescribe annual reporting and, for companies meeting the prescribed criteria, impact assessment of qualifying CSR projects. The 2022 amendment changed the limit on expenditure that may be booked towards impact assessment. Companies should verify the current CSR Rules and applicable MCA forms while preparing the annual CSR disclosures.

Section 136 - Right of Member to Copies of Audited Financial Statements

Meaning: Section 136 protects access to financial information by requiring the company to circulate or otherwise make available the financial statements and accompanying documents that are to be laid before the company in general meeting. It also creates inspection rights and specific website obligations for listed companies.

Documents covered

The provision covers the financial statements, including consolidated financial statements where applicable, the auditor's report, and every other document required by law to be annexed or attached to the financial statements.

Who is entitled to receive the documents?

Subject to the statutory provisions and applicable rules, copies are to be sent to every member, every trustee for debenture-holders of debentures issued by the company, and other persons entitled to receive them.

Twenty-one day requirement

Section 136 generally requires the relevant documents to be sent not less than 21 days before the general meeting. Where documents are sent in a shorter period, the statutory consent requirements for treating the shorter circulation as valid must be satisfied.

Listed company requirements

Section 136 contains special provisions for listed companies concerning inspection, circulation of salient features or full financial statements as applicable, and placement of financial statements and related documents on the company's website. A listed company having subsidiaries must also comply with the statutory website requirements relating to separate accounts of subsidiaries, including the special rules for foreign subsidiaries.

Inspection and subsidiary accounts

A company must allow every member or trustee of debenture-holders to inspect the documents referred to in Section 136(1) at its registered office during business hours. A company having a subsidiary or subsidiaries must provide a copy of the separate audited or unaudited financial statements, as applicable, prepared for each subsidiary to a member who asks for it.

Penalty under Section 136(3)

For default in complying with Section 136, the company is liable to a penalty of Rs. 25,000 and every officer of the company who is in default is liable to a penalty of Rs. 5,000.

Practical distinction between Sections 135 and 136

Official resources

For current statutory text, rules, notifications, forms and MCA filing requirements, verify the latest material on the official Ministry of Corporate Affairs portal. For CSR, the MCA's CSR FAQs and the Companies (Corporate Social Responsibility Policy) Rules are especially relevant because the rules prescribe detailed implementation, reporting and compliance requirements.

Updated: 17 September 2026. This page is an explanatory legal-information article. Statutory text, notifications, rules and applicable exemptions should be checked for the relevant company and financial year.