A Parliamentary Standing Committee has recommended raising the limit of donations a company can make to the political parties in a year from 5 per cent to 7.5 per cent of the average net profits in three immediate past financial years.

It said increase in the maximum percentage of contributions allowed was necessary “in view the fact that the number of political parties in the country has increased and such donations are not made every financial year.”

The committee headed by for former Finance Minister Yashwant Sinha  gave the suggestion as part of its report submitted to Parliament on the scrutiny of the Companies Bill, 2009 brought by the government based on a concept paper of a panel headed by J J Irani of Tata Sons for a new comprehensive compact law, replacing the present law amended seven times.

It also suggested that the contributions should be limited to the political parties “registered” with the Election Commission and sought removal of a sub-clause for contributions to “any person for a political purpose” as it has scope of misuse.

On another provision empowering the board of directors of a company to donate to charitable funds in excess of 5 per cent of net profits of last three years, the committee wants a cap on such contributions and that too only with the consent of shareholders by a special resolution.

Also, the committee says such donations should go to only the “bonafide” charitable institutions that “have neither attracted any restraints from any regulatory authorities, including the revenue department of government, in the past nor have defaulted in filing the requisite annual returns and statements with the government.”

The committee has also sought restoration of the existing provision in the present law regarding contributions made to the National Defence Fund. It has been omitted without any justification, the committee underlined.

The Bill that will now come up for discussion and passage in the next winter session proposed from November 8 provides for liberal and speedy incorporation of companies, including one-person company and stringent provisions to curb misuse or diversion of the company funds for non-bonafide purposes.

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