Political
Contributions :
S. 293 (1)(l) of company’s Act, 1956
empowered BOD of a public company or a subsidiary of a public company to contribute
charitable and other funds not directly relating to business of company ...any
amount not exceeding Rs. 25,000 or 5% of average net profits, whichever is
greater.
ü However,
the Act did not provide for any specific and clear provision for political
contributions by companies.
ü At
any time of second general election in 1957, there was pressure in companies
for political contributions. But companies had no provision in MOA for such
contributions and applied to respective HCs for seeking confirmation of
alteration.
ü The
Bombay HC in Jayantilal vs TISCO
(1957) while upholding the amendment permitting the companies to make
political contributions observed that ‘It is a danger which may ultimately
overwhelm and even throttle democracy. Therefore, it is desirable for
parliament to consider circumstances and limitations under which companies
should be permitted to make these contributions.
ü The
Calcutta HC in TISCO’s case (1957) while confirming the lateration observed
that stock companies are not intended to be adjuncts to political parties and
possible sources of revenue for these parties.
ü The
dangers of political contributions were noticed by the parliament. The
companies (Amendment) Act, 1960 inserted S. 293 A by which restrictions were
imposed on political contributions. The
said section permitted the companies to contribute to political parties or for
political purposes an amount restricted to RS. 25,000 or 5% of average net
profits or whichever is greater. The provision also imposed an obligation on every
company to disclose such contribution in its P&L A/c to safeguard the evil
power of money.
ü The
parliament enacted Company’s (Amendment) Act, 1969 substituting S. 293A with
new provisions which imposed a total ban on contributions to political parties as
political purposes to any individual or body. Any contravention was made
punishable.
ü The
companies circumvented this provision by issuing advertisements in the
sovenieurs published by political parties.
ü The
Calcutta HC in Graphite India vs
Dalpat Raj (1978) held that payments for such advertisements in sovenieurs
were not political contributions .
ü The
company’s (Amendment) Act, 1985 lifted ban on political contributions by
companies and incorporated S. 293A allowing company to make contributions to
political parties or for political purposes.
ü The
section
§ Seeks
to continue the ban on political contributions in case of government companies
and companies in existence for less than three financial years.
§ Permits
all other companies to make political contributions directly or indirectly to
any political party for any political purpose to any person the amount or the aggregate of the amounts which may be so
contributed by a company in any financial year shall not exceed five per cent
of its average net profits determined and a resolution authorising the making
of such contribution is passed at a meeting of the Board of Directors.
§ Provides that a donation or subscription or payment caused to be
given by a company on its behalf or on its account to a person who, to its
knowledge, is carrying on any activity which can reasonably be regarded as
likely to effect public support for a political party; and the amount of
expenditure incurred, directly or indirectly, by a company on advertisement in
any publication (being a publication in the nature of a souvenir, brochure,
tract, pamphlet or the like) by or on behalf of a political party or for its
advantage shall be deemed to be political contributions.
§ Provides that Every company shall disclose in its p & L a/c
any amount contributed by it to any political party or for any political
purpose to any person during the financial year to which that account relates,
giving particulars of the total amount contributed and the name of the party or
person to which or to whom such amount has been contributed.
§ contravention of the provisions of this section,-
(a)
the company shall be punishable with fine which may extend to three times the
amount so contributed; and (b) every officer of the company who is in default
shall be punishable with imprisonment for a term which may extend to three
years and shall also be liable to fine.
CHARITABLE CONTRIBUTIONS
Political Contributions :
DIVIDEND
BORROWING POWER OF COMPANY DEBENTURE AND CHARGE
Allotment of shares
LAW OF PROSPECTUS IN COMPANY LAW
Relationship between MOA and AOA.
DOCTRINE OF ULTRA VIRES
CONVERSION OF PRIVATE Company TO PUBLIC Company
KINDS OR TYPES OF COMPANIES
COMPANY LAW:-Characteristics of Company
