1956: The Companies Act, 1956 (“1956 Act”) when it was enacted did not regulate contributions to political parties by companies.
1960: Thereafter, the Companies (Amendment) Act, 1960 included Section 293A to regulate contributions by companies. It stipulated the following:
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Cap on contributions: The contribution should not exceed Rs.25,000/- in a financial year or 5% of the company’s average net profits during the past 3 years, whichever is greater.
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Disclosure of particulars in the profit & loss account: The total amount and name of the recipient was required to be disclosed.
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Penalty: Failure to comply with the disclosure requirement was punishable with a fine of up to Rs. 5000.
1969: The Companies (Amendment) Act, 1969 amended Section 293A in the following manner:
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Complete ban on contributions to political parties and for political purposes.
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Contravention of the ban was punishable with a fine of up to Rs. 5000 and every officer in default was punishable with imprisonment of up to 3 years, besides a fine.
1985: The Companies (Amendment) Act, 1985 amended Section 293A to permit contributions once again for political purposes and added three restrictions in addition to the earlier ones. The additional restrictions were:
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Non-government companies making contributions should have been in existence for more than 3 years.
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A resolution authorizing the contributions had to be passed by the board of directors.
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The fines for non-compliance were increased to 3 times the contribution amount.
2013: The CA 2013 through Section 182, substantively incorporated the provisions of Section 293A of the 1956 Act, as amended in 1985, with the following changes:
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Cap on contributions: a company’s contribution in any financial year should not exceed 7.5% of its average net profits from the preceding 3 years.
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More stringent penal consequences: The fine was increased to up to 5 times the contribution amount.
Source: Barandbench
