Monthly Archives: December 2013

Contribution to Political Parties – section 182 of Companies Act, 2013

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. 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) If a company makes a contribution in contravention of the provisions of section 182, then the company shall be punishable with a fine which shall not be less than 5 times the amount so contributed and also every officer in default is liable to imprisonment for a term which may extend to six months and also fine of 5 times the amount so contributed. 

8) 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).

MCA circular is available on this link.



Filed under company law

Inflation indexed NSCs

RBI has decided to introduce Inflation Indexed National Savings Certificates which opens for subscription from December 23, 2013 and closes on December 31, 2013 or earlier if the issue gets subscribed by that date. The face value of each Bond is Rs.5000/- and will bear interest at 1.5% per annum (fixed rate) + inflation rate calculated with respect to final Consumer Price Index but with a three month lag i.e. September CPI rate will be used for December interest.Other features of the issue are given in the enclosed notification. The Bond will be held in a Bond Ledger Account with the Bank and so there will not be any certificate, but I guess they will issue a pass book showing the entries.


Leave a comment

Filed under Uncategorized

Justice Sodhi Committee recommendations on insider trading

SEBI has put out a press release announcing the submission of Justice Sodhi Committee recommendations on insider trading in listed companies. The salient features of the proposed regulations based on his recommendations are also given. From a cursory glance at the recommendations, there is nothing new in that which is not already covered by the existing Insider Trading Regulations. The only point of interest or rather concern is in para 5 of the press release which states as follows:

5- Insiders who are liable to possess UPSI all round the year would have the option to formulate pre-scheduled trading plans. In such cases, the new UPSI that may come into their possession without having been with them when formulating the plan would not impede their ability to trade. Trading plans would, however, be required to be disclosed to the stock exchanges and have to be strictly adhered to.

It is not clear what this means – that insiders who are likely to possess UPSI all the time are required to formulate their buying and selling plans in advance. I don’t know which investor would have that kind of clairvoyance to formulate their trading plans in advance. Anyways the devil is in the details, so let us wait for the detailed regulations based on the recommendations. 

A copy of the press release is given in this link.



Leave a comment

Filed under Uncategorized

Simplification of demat account opening process

SEBI has issued a circular dated 4th December 2013 on simplification of demat account opening process. Basically what they have done is replace the existing Beneficiary Owner – Depository Participant Agreement with the common document called “Rights & Obligations of Beneficial Owners and Depository Participants”. SEBI promises that this will harmonise the demat account opening process for trading as well as demat account besides also reducing the no. of signatures required on the documents. Depository Participants are required to send the revised document to its existing clients as well and take their signatures as an acknowledgement of having received the same – well that is one signature added to the existing process!!!

Well, let’s hope the new regime brings in more demat customers and spurs the retail boom in stock markets. 

Copy of the SEBI circular is found here



Leave a comment

Filed under Uncategorized