Ad Free CAclubindia and Daily Updates on your Mobile. Subscribe Now!

Donation resolution of general meeting

aasita (ACA) (387 Points)

26 February 2010

can shareholders delegate power to directors to make donation subject to 25 lakhs or 5% of avg profit as determined as per the provisions of companies Act ?for how many years this resoltuion is valid or every yr resolution is to be passed?

Reply
Follow
Share

9 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 February 2010

Kindly elaborate about the nature of donation whether it is--

1. Political donation u/s 293A

2. Defence donation u/s 293B

3. Donation for the welfere of the employees

Upgrade to CAclubindia Pro. Subscribe Now!

aasita (ACA) (387 Points)
Replied 26 February 2010

No its general donation to bank officer association ,employees donation,education society.But is it feasible to pass resolution by general meeting and empower directors to make donation upto 25 lakhs or 5% of avg profit for any financial yr?

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 February 2010

Your case is governed by section 293(1)(e) which reads as follows:

contribute, after the commencement of this Act, to charitable and other funds not directly relating to the business of the company or the welfare of its employees, any amounts the aggregate of which will, in any financial year, exceed fifty thousand rupees, or five per cent, of its average net profits as determined in accordance with the provisions of sections 349 and 350 during the three financial years immediately preceding, whichever is greater.

If your actual donation amount exceeds (fifty thousand rupees or five per cent of net profit, whichever is higher), then you have to go for prior approval of shareholders.

This power cannot be delegated to the board.

Procedure:

1. Pass a board resolution for donation subject to the approval of shareholders.

2. Approve notice of GM.

3. Pass GM resolution.

Regards

aasita (ACA) (387 Points)
Replied 26 February 2010

ok agreed but can members pass resolution in same meeting for next financial yr for making donations as discussed above?

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 February 2010

This GM resolution would be valid for the financial year in which itis passed. Reason being this calculation is based on net profit for the financial year which may be changed in the next year. So for the next year you have to pass a fresh resolution.

However this is my personal understanding. Views of other learned members solicited.

Best Regards

Upgrade to CAclubindia Pro. Subscribe Now!

aasita (ACA) (387 Points)
Replied 26 February 2010

Sir pls find the attached file which i got from net of some listed co where by resolution is proposed for empowering directors to make donations in future also subject to specific limit.

Attached File : 12 donation reslotuion.pdf downloaded: 949 times

aasita (ACA) (387 Points)
Replied 26 February 2010

What I want to say is can blanket permission be taken taken from members for future financial yr for making donation?

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 February 2010

Kindly appreciate approval and empowering BOD to donate upto a fix limit (properly mentioned in the GM resolution) is very much allowed as a corporate practice.

But giving blankat approval is absolutely invalid. Like "BOD is authorised to donate upto any limit." This kind of language is absolutely not allowed or bad in law.