Contribution by companies under Companies Act, 2013-RegisterKaro
Updated: Sep 30, 2022
Bona Fide and Charitable Funds Section 181, Political Funds Section 182, National Defence Fund section 183, Contribution by Companies under Companies Act, 2013.
INTRODUCTION:
Generally, many companies do contribute in different forms and various sectors. The purpose of the contribution by the company is to maintain the goodwill of the company and maintain corporate social responsibility.
TYPES OF FUNDS:
There are three categories in which the companies are contributing the funds. They are as follows:
Company to Contribute to bona fide and Charitable Funds. [Section 181 of The Companies Act,2013]
Prohibitions and Restrictions regarding the political contributions. [Section 182 of The Companies Act,2013]
Power of Board and other provisions to make Contributions to the National Defence Fund [Section 183 of The Companies Act,2013]
CHARITABLE FUNDS:
To begin with the contribution to a bona fide and charitable fund, it is stated under the provisions of the company law that all/any type of company can contribute to the charitable funds.
LIMITATION:
There is a particular limit to contribute the funds which is authorised to the Board of Directors.
In the category of charitable funds, the companies can contribute up to five percent of the aggregate net profit of the previous three years.
If the aggregate contribution is up to the limit [i.e., 5 percent of the average net profit of previous years], then the board can bypass the board resolution.
If the aggregate contribution amount in any financial year is exceeding the limits specified for the board, then there is a requirement of the shareholder’s approval for such contribution and to bypass the ordinary resolution.
ILLUSTRATION:
To illustrate that, let us assume that the average of the net profit is 2,00,000 INR and multiply it with 5 percent [the limit] is equal to the 10,000 INR and after that the board will bypass the board resolution.
This statutory provision [Section 181 of the Companies Act, 2013] is applied to the public companies as well as the private companies.
POLITICAL FUNDS:
To begin with the contribution to a Prohibitions and Restrictions regarding the political contributions., it is stated under the provisions of the company law that all/any type of company can contribute to this funds.
LIMITATION:
All type of companies can do political contributions without any type of limit. The contribution can be done in the form of either directly or indirectly.
However, few companies are excluded, they are as follows:
· A Government company;
· A Company which has been in the existence for less than three financial years.
DEEMED POLITICAL CONTRIBUTION:
The term “Deemed Political Contribution” means in which the company is contributing the funds in an indirect manner.