Section 182 of Companies Act, 2013: Political Donation Rules & Compliances

Section 182 of the Companies Act, 2013 regulates the political contributions made by companies in India, ensuring transparency and accountability in corporate involvement in political activities. This article delves into the intricacies of Section 182, outlining its provisions, permissible modes of contribution, implications of non-compliance, and the broader legal framework.

Provisions of Section 182

A company other than a government company or a company that has been in existence for more than 3 years may contribute any amount, directly or indirectly, to any political party by passing a resolution at the meeting of the board.

The company needs to pass a resolution at the meeting of the board, and no resolution by circulation is permitted. companies making political contributions only need to pass a resolution at the meeting of the board, and no resolution is required to be passed at the meeting of shareholders.

Disclosure Requirements

The company making a political contribution also needs to disclose the total amount contributed by it in its profit and loss account relating to the financial year to which the amount contributed relates.

Modes of Contribution

Further, the companies are required to make such a contribution only through:

1. Account payee check drawn on a bank or
2. Account payee bank draft or
3. Use of an electronic clearing system through a bank account.

As companies act specifically provide for particular mode through which contribution can be made therefore, no other mode is permissible.

Definition of Political Contributions

As per Section 182 Subsection 2, the following amount shall be deemed to be a political contribution:

a) A donation, subscription, or payment caused to be made by a company on its behalf or on its account to a person who, to its knowledge, is carrying on any activity that, at the time such a donation, subscription, or payment was given or made, can reasonably be regarded as affecting public support for a political party.

(b) the amount of expenditure incurred, directly or indirectly, by a company on an advertisement in any publication, being a publication in the nature of a souvenir, brochure, tract, pamphlet, or the like:

(i) where such publication is by or on behalf of a political party, to be a contribution of such amount to such political party, and

(ii) where such publication is not by or on behalf of, but for the advantage of, a political party, to be a contribution for a political purpose.

Non-Compliance and Penalties

Section 182 also provides for punishment as follows:

• If the company fails to comply with the above provisions, it shall be punishable with a fine, which may amount to five times the amount so contributed.
• Every officer of the company who is in default shall be punishable with imprisonment for a term that may extend to six months and with a fine that may extend to five times the amount so contributed.

Conclusion

Section 182 of the Companies Act, 2013 strikes a balance between corporate freedom to engage in political contributions and regulatory oversight to prevent misuse and maintain transparency. By mandating specific modes of contribution, requiring board-level authorization, and imposing stringent penalties for non-compliance, the law ensures that corporate political activities align with ethical standards and legal obligations.