Update: Companies (Amendment) Bill, 2025 – Proposed Expansion Of CSR Framework

The Companies (Amendment) Bill, 2025 ("Bill") was introduced in Rajya Sabha on December 05, 2025. The proposed Bill seeks to amend section 135 of the Companies Act, 2013 ("Act") relating to Corporate Social Responsibility ("CSR"). The stated objective of the Bill is to expand the scope of mandatory CSR obligations by bringing medium-sized companies within the CSR regime and strengthen governance of CSR activities at the board level by mandating extensive planning and implementation expertise within the CSR committee.

The Supreme Court of India, in its recent judgement in the case of M.K. Ranjitsinh v. Union of India, 2025 SCC OnLine SC 2899 (which primarily dealt with the conservation of the Great Indian Bustard) made certain observations (in the context of explaining why renewable energy generators should contribute to species conservation) regarding CSR. The Court observed that Section 135 of the Act effectively codifies the principle that corporate profit is not solely the private property of shareholders but is partly owed to the society that enables its generation. The Court further observed that Section 166(2) requires directors to act in good faith in the interests of the company, its employees, the shareholders, the community, and for the protection of environment, and that CSR funds are the tangible expression of this duty.

Proposed Amendments to Section 135

Section 135 (1) of the Act, in its current form, read as follows:

"(1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during [the immediately preceding financial year] shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more Directors, out of which at least one director shall be an independent director.

[Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more Directors.]"

The Bill seeks to substitute Section 135(1) of the Act, with the following:

"(1) Every company having net worth of rupees one hundred crore or more, or turnover of rupees five hundred crore or more or a net profit of rupees three crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director and one among the other directors shall have extensive experience in planning and implementing Corporate Social Responsibility projects.

Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors."

Analysis

Lowering of CSR applicability thresholds

Under the existing framework, CSR obligations apply to companies meeting higher financial thresholds. The Bill proposes to substantially lower these thresholds. If this amendment comes through, CSR provisions would apply to every company which, during the immediately preceding financial year, has:

1. Net worth of INR 100 crore (Rupees one hundred crore) or more; or

2. Turnover of INR 500 crore (Rupees five hundred crore) or more; or

3. Net profit of INR 3 crore (Rupees three crore) or more.

This represents a significant expansion of the CSR net, particularly for companies that were previously outside the mandatory CSR regime.

Reconstitution of CSR committee:

The Bill substitutes section 135(1) to revise the composition of the CSR committee as follows:

1. Of the three or more directors in the CSR committee, at least one director must be an independent director and one of the other directors must have extensive experience in planning and implementing CSR projects.

This is a departure from the current framework, which mandates an independent director but does not require demonstrable CSR expertise.

Rationale

The statement of objects and reasons highlight that:

1. CSR has emerged as a key instrument for social and economic development, particularly in areas such as education, healthcare, and community development.

2. With the Government gradually reducing direct social sector spending, private sector participation through CSR has assumed greater importance.

3. Expanding CSR obligations to companies with relatively lower financial thresholds is expected to significantly increase private sector funding for social initiatives.

4. The absence of a requirement for CSR-specific expertise at the board level has been identified as a gap in the existing regime, which the Bill seeks to address by mandating the inclusion of a director with CSR experience.

Key Implications if the Bill gets passed

1. Wider CSR coverage: A large number of mid-sized companies are likely to fall within the CSR framework for the first time, triggering new compliance, governance and reporting obligations.

2. Board-level impact: Companies may need to re-evaluate board composition and director skill sets to ensure compliance with the proposed CSR committee requirements.

3. Implementation challenges: Identifying and appointing directors with "extensive experience" in CSR planning and implementation may raise interpretational and practical issues, especially in closely-held or promoter-driven companies.

4. Increased CSR spend: While the Bill does not directly amend the CSR spending percentage, expansion of applicability is expected to materially increase overall CSR funding in the ecosystem.

Status

The Bill proposes that the amendments will come into force on such date as may be notified by the Central Government in the Official Gazette. As of now, the provisions are proposed and not yet in force.

Please find attached a copy of the Amendment, here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.