The Government is preparing to overhaul how medium and large enterprises manage and spend their Corporate Social Responsibility (CSR) budgets.

The draft of the Companies Act, 2082, which is slated for registration in parliament, proposes a mandatory 1% contribution of net profits from high-turnover companies into a centralized government fund. The initiative aims to seal financial loopholes and align corporate social spending directly with state priorities.

Key Provisions of the Proposed Bill

1. The Threshold and Mandate

• Applicability: Every company with an annual turnover exceeding Rs 250 million.
• Requirement: Must deposit a minimum of 1% of their net profit into the government's integrated fund.
• Voluntary Clause: Small companies (turnover below Rs 250 million) may contribute to the fund on a voluntary basis.

2. Governance: A Powerful Board of Directors

To manage and mobilize the collected revenue, the draft proposes a high-level Fund Board of Directors linked directly to national planning.

3. Strict Penalties for Non-Compliance

The law introduces teeth to CSR enforcement. If an eligible company fails to deposit the required amount, it faces a penalty of up to 1.5% of its annual net profit after tax.

Approved Sectors for Expenditure

To prevent the misuse of budgets on unproductive or self-serving corporate programs, Chapter 28 of the new bill explicitly restricts fund deployment to the following areas:

• Health & Education: Improving public health systems and educational infrastructure.
• Disaster & Climate: Disaster risk reduction, humanitarian relief, environmental protection, and climate change adaptation.
• Social Inclusion: Enhancing income-generating capacities for persons with disabilities and marginalized communities.
• Heritage & Infrastructure: Remote area infrastructure development, epidemic relief, and the preservation/reconstruction of national heritage sites.
• Consumer Empowerment: Financial literacy, investor education, and consumer protection programs.

Why the Change? Moving Away from Act, 2063

Under the prevailing Companies Act, 2063, and the Industrial Enterprise Act, CSR guidelines lacked an integrated, single-door structure.

Historically, companies utilized CSR budgets at their own discretion. This led to frequent accusations of businesses using the funds as tax-deductible tools for self-promotion, branding, or funneling capital back into their own allied organizations, raising serious questions about transparency.

Private Sector Reaction: Structural Reform vs. "Additional Tax"

The draft has triggered mixed reactions across Nepal’s business landscape:

• The Government’s Stance: The centralized fund will eliminate opacity, streamline resource mobilization, and ensure that target communities receive verified, structured relief.
• The Private Sector's Skepticism: Some entrepreneurs view the mandate as an "additional tax" in disguise. Critics argue that stripping companies of direct control over their CSR funds will sever the emotional closeness and direct relationships businesses build with their local communities.

If passed in its current form, the Companies Act, 2082 will mark a historic turning point, legally shifting CSR in Nepal from voluntary corporate philanthropy to state-regulated national development.