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).

http://www.mca.gov.in/Ministry/pdf/General_Circular_19_2013.pdf

MCA circular is available on this link.