Contribution:-
The general meaning of the word contribution means to
donate, to gift or a payment made to a common fund.
The word denotes that there is no Liability and it is voluntarily
donating the money for a common cause.
Lets look at the provisions of Companies Act, 2013 with respect to
"Contribution".
The Act does not define the word "Contribution". This article covers the
Voluntary contribution made by the Companies.
The Companies Act, 2013 talks about 3 types of Voluntary
Contribution. Chapter XII dealing with the Power of the Board
explains the contributions under the following sections:
Section 181- Contribution to Bona fide and Charitable Funds
etc.
Section 182- Political Contribution.
Section 183- Contribution to National Defence Fund, etc.
Powers:-
As the provisions relating to Contribution comes under the Chapter
XII dealing with Board powers, it is clear that the power to contribute the
money of the company vests under the Board of Directors.
Lets look in detail about the various contributions :
Section 181- Contribution to Bona fide and Charitable Funds
etc.
The act empowers that the Board of a company may contribute to
Charitable funds, provided the "Aggregate amount of contribution in a
Financial year does not exceed 5% of Average Net Profit of 3
immediately preceding Financial years". The board approval may
be sought either at the meeting of the Board or by way of Circular Resolution
as the act is silent with regard to this.
If the above said limit exceeds, the Shareholders approval is
required by way of a general meeting.
Section 182- Political Contribution.
The act is partial with respect to Political contribution and it
provides certain restrictions in contributing to political parties. They are,
"A Company which is not a Government Company and which has
been in existence for more than 3 years may contribute directly/indirectly to
any political party." This clearly implies that Government companies and
new companies cannot contribute to political parties.
The reason behind providing such a restriction is that no
company should be formed with a sole motive of encouraging political
contribution. Though the growth and fund needs of political parties are met by
way of such contribution by the Corporates.
In one Financial Year, the Aggregate Contribution shall not exceed
7.5% of Average Net Profit of 3 immediately preceding Financial
years and such a contribution must be approved by the board of directors at the meeting
of the Board.
Disclosures to be made in the Profit/Loss Account about Name of
the political party and the amounts contributed by the company
during the Financial Year to which the Account relates.
Contravening the provisions relating to disclosure in Financials
is a punishable offence and the punishment is "payment of fine extending
to 5 times the amount contributed and the Officer in Default is
punishable with Imprisonment upto 6 months and Penalty.
Section 183- Contribution to National Defence Fund, etc.
The act provides that a company may contribute to National Defence
Fund/ any other fund for Defence purpose. There is No Limit for
contribution.
There is an overriding provision with respect to this
contribution. Neither act nor any other law for the time being in force nor the
Memorandum, Articles or any other document relating to the company can restrict
this Contribution.
The Board/any person/Authority
which exercises the powers of the Board/
the company in general meeting can contribute to the National
defence fund.
Disclosure to be made in the Profit/Loss account of the company
during the Financial year in which such contribution is made.
All the above contributions are voluntary contributions of the
company intended for the larger benefit of the society and Nation. The Act does
not mandate such donations by the company. These provisions were present int eh
Companies Act, 1956 too. The above said powers are primarily exercisable by the
board and only when the contribution exceeds the specified limits the Members
approval in General Meeting is required.