COMPANY TO CONTRIBUTE TO BONA FIDE AND CHARITABLE FUNDS, ETC. [SECTION 181]
Section 181 of the Act, applicable to both public and private companies, empowers the Board of Directors to contribute to bona fide charitable and other funds up to a particular limit which if exceeded needs to be permitted by company through passing an ordinary resolution.
Limit on contribution by the Board of Directors: The Board is empowered to contribute any amount in any financial year if the aggregate amount of such contribution does not exceed five per cent of the average net profits of the company for the three immediately preceding financial years.
Where the above limit is exceeded: In case the aggregate contribution amount in any financial year is beyond the limit specified for the Board, prior permission of the company in general meeting shall be required for such contribution.
The expression “other funds” is wide enough to enable contributions of the kind, specified in the special resolution to be made by the company. [Straw Products Ltd. vs. Registrar of Companies [1969].
POLITICAL CONTRIBUTIONS [SECTION 182] Section 182 of the Act, deals with the provisions relating to prohibitions and restrictions regarding political contributions. These provisions are stated as under:
(i)Contribution by a company to political parties: A company is permitted to contribute any amount (without any limit) directly or indirectly to any political party, notwithstanding anything contained in any other provision of the Companies Act, 2013. It is to be noted that Section 182 (1) has overriding effect.
Meaning of Political Party: The term “political party” means a political party registered under section 29A of the Representation of the People Act, 1951.
(ii)Companies not allowed contributing to political parties: The following companies are not allowed to contribute to any political party:
(a) a Government company; and
(b) a company which has been in existence for less than three financial years.
(iii)Procedure for making contribution: A company shall make the contribution to a political party only after a resolution authorizing the making of such contribution is passed at a meeting of the Board of Directors. In effect, such resolution shall be deemed to be justification in law for the making of the contribution authorized by it. [Proviso to Section 182(1)].
(iv) Deemed political contributions [Section 182(2)]:
In addition to making any direct contribution to a political party, following contributions are also deemed as political contributions:
(a) A donation or subscription or payment given by a company to a person who, to its knowledge, is carrying on any activity which, at the time at which such donation or subscription or payment was given, can reasonably be regarded as likely to affect public support for a political party.
(b) The amount of expenditure incurred, directly or indirectly, by a company on an advertisement in any publication being in the nature of a souvenir, brochure, tract, pamphlet or the like:
(1) Where such publication is by or on behalf of a political party.
(2) Where such publication is not by or on behalf of, but for the advantage of a political party.
(v) Disclosure of contributed amount [Section 182(3)]:
Every company shall disclose in its profit and loss account the total amount contributed by it under Section 182 during the financial year to which the account relates.
(vi) Modes of contribution [Section 182 (3A)]:
The contribution to a political party under Section 182 shall be made according to the following modes:
By an account payee cheque drawn on a bank.
By an account payee bank draft.
By using electronic clearing system through a bank account.
Through any instrument, issued pursuant to any scheme notified under any law for the time being in force, for contribution to the political parties. [Section 182(3A)]
(vii) Punishment for contravention:
If a company makes any contribution in contravention of the provisions of Section 182, the punishment shall be as under:
Company: Punishable with fine up to five times the amount of contribution so made.
Every defaulting officer: Punishable with imprisonment up to six months and with fine up to five times the amount of contribution so made.
POWER OF BOARD AND OTHER PERSONS TO MAKE CONTRIBUTIONS TO NATIONAL DEFENCE FUND, ETC. [SECTION 183]
Section 183 of the Act, empowers the Board and other authorized persons to make contributions to the National Defence Fund, etc. as described below:
(i) Contribution of amount to National Defence Fund/other fund as approved by the Central Government:
(a) No limit: Contribution to the National Defence Fund or any other Fund approved by the Central Government for the purpose of national defence can be made without any limit.
(b) Exercise of power: The power to make such contribution shall be exercised by:
The Board of Directors of the company; or
Any person or authority exercising the powers of the Board of Directors or of the company in general meeting.
(c) Overriding effect: Section 183 has overriding effect i.e. the contribution may be made notwithstanding anything contained in Sections 180, 181 and 182 or any other provision of the Companies Act, 2013 or in the memorandum, articles or any other instrument relating to the company.
(ii) Disclosure in profits and loss account: Every company shall disclose in its profits and loss account the total amount or amounts contributed by it to the National Defence Fund or any other approved fund, during the financial year to which the amount relates.
