Summary: Article explains that following the Supreme Court’s 2024 judgment striking down the Electoral Bonds scheme, the provisions of Section 182 of the Companies Act, 2013 governing corporate political contributions have been fully restored. It states that only non-government companies that have been in existence for at least three financial years may make direct or indirect political contributions, and only to political parties registered under Section 29A of the Representation of the People Act, 1951. The aggregate contribution in a financial year must not exceed 7.5% of the company’s average net profits during the three immediately preceding financial years. The prescribed procedure includes obtaining Board approval through a resolution, filing Form MGT-14 with the Registrar of Companies within 30 days in the case of public limited companies, making contributions only through specified banking channels, and disclosing the total amount contributed along with the name of the political party in the company’s Profit and Loss Account. The content further notes that private limited companies are exempt from filing the Board resolution with the Registrar of Companies.
INTRODUCTION:
Following the Supreme Court’s landmark 2024 judgment in Association for Democratic Reforms & Anr Vs. Union of India & Ors., striking down the Electoral Bonds scheme, the strict guardrails of Section 182 of the Companies Act, 2013 have been fully reinstated. For Corporate India, this means a mandatory return to absolute transparency, formal board approvals, and the strict profit cap. If your company is planning a political contribution, here is the definitive, updated compliance checklist you must follow to stay legally protected.
GOVERNING PROVISIONS OF COMPANIES ACT, 2013:
| Section 182 of the Companies Act, 2013 governs corporate political funding in India. Following the Supreme Court of India’s ruling in February 2024, which struck down the Electoral Bonds scheme as unconstitutional, the previous rules regarding limits and mandatory disclosures were fully restored. |
B. PROCEDURE:
| Sr. No | Steps |
| 1. | Section 182 of the Companies Act, 2013, explicitly provides that the contribution of any amount directly or indirectly to any political party be made by:
a. A company which is not a government company. b. Any company which has been in existence for at least three financial years. |
| 2. | Eligible Political Parties: Ensure the recipient is a political party officially registered under Section 29A of the Representation of the People Act, 1951. |
| 3. | Limit of Contribution: Ensure the aggregate contribution in any financial year does not exceed 7.5% of the company’s average net profits during the three immediately preceding financial years. |
| 4. | Convene a Board Meeting and pass a resolution for approval of contribution to the political party. |
| 3. | In case of a public limited company, copy of a board resolution to be filed with Registrar of Companies within 30 days of passing the resolution in Form MGT-14. |
| 4. | Ensure the contribution is made through legal banking channels:
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| 5. | Disclose the total amount contributed under this section in the company’s Profit and Loss Account for the relevant financial year, giving particulars of the total amount contributed and the specific name of the party to which such amount has been contributed. |
C. Steps not applicable to private companies:
| A private limited company is exempt from filing the board resolution approving the political contribution with the ROC. |
CONCLUSION:
Ultimately, the 2024 Supreme Court verdict realigned corporate political funding with democratic transparency. With the prescribed limit and mandatory disclosure rules fully restored, strict adherence to Section 182 is no longer just a routine compliance tick-box—it is a critical shield against severe penal action. For management and compliance professionals, the mandate is now clear: ensure absolute transparency, document every step of the Board’s approval, and keep your annual financial disclosures faultless.
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Author : Ms. Kathanshi Jain, Article Assistant at M/s Ronak Jhuthawat & Co, Practicing Company secretary Call: +91 98874 22212 | Email: compliancerjac@gmail.com
