Government has taken off the cap on political
Section 182 of the Companies act, 2013 which has been notified with effect from 12th September 2013 provides for prohibitions and restrictions regarding political contributions.
The board of directors have to approve the contribution to be made through a resolution.
Salient features of this section are given below:
1) All companies except Government companies and companies in existence for less than 3 years are covered by this section;
2) The maximum amount that a company can contribute to a political party(ies) in year shall not exceed 7.5% of its average net profits during the three preceding financial years;
3) Before making the contribution, the Board should approve of the same by way of resolution passed at its Board meeting;
4) Subscription, donation or payment made to a person who is carrying on such activity which affects public support for a political party shall also be deemed to a contribution to a political party;
5) Expenditure incurred directly or indirectly by a company on a publication, souvenir, journal, pamphlet for or on behalf of a political party shall also be construed as making a contribution to a political party;
6) Every company should disclose in its profit and loss account any amount contributed to a political party in any financial party, giving the particulars of the total amount contributed and also name of the political party;
7) Political party means a party registered under section 29A of the Representation of People’s Act, 1951
Ministry of Corporate Affairs has issued a clarification vide its circular no. 19/2013 dated 10/12/2013 that :-
1) where companies make contribution to “Electoral Trust companies” rather than directly to political parties then they need not disclose separately the amounts paid to each Electoral Trust company. It would be sufficient if a consolidated figure is mentioned in the accounts as paid to Electoral Trust Company;
2) Companies making contribution directly to a Political Party will be required to make the disclosures as required by section 182(3) of the Act;
3) Electoral Trust Companies in turn should make disclosures regarding contributions made by them to political parties as required under section 182(3).
Now,Government has passed a money bill in Lok Sabha on wed(22/03/2017) taking off
the cap on political contribution. This effectively means that the parliament has passed
the bill as Rajya Sabha does not have any power to reject a money bill.
Companies will also be allowed to keep the names of political parties confidential
in their accounts..The amount of donation, however still needs to be disclosed
Object of the bill:
curb on unaccounted flow of funds into political system and encouragement of
non cash funding to increase and curb on anonymous donation !!!!