India Legal News: Corporate Donations to be made Transparent in India
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Much has been whispered about the hidden funding sources of political parties during election. The government of India is planning to make corporate funding and its details transparent and usher in an era of open, shareholder democracy. Will it mean that the country's leaders play fiddle to corporate barons? Will the ordinary man lose his role in a democracy? Let's first find out what the proposed rules and regulations look like.
According to India legal news reports in August 2010, the government of India is ready to make corporate donations to political parties more transparent. It is a known fact that political parties in India receive huge amounts as donations from corporate houses. However, funding political parties out of a company’s profit have been often subjected to criticism. This issue comes under greater scrutiny during the time of elections because prominent political parties in India overspend and violate the spending limits set by the Election Commission of India. Also, very little is done by these parties to improve or optimize the political funds they get from corporate houses.
Salman Khurshid, the Minister of State for Corporate Affairs, stated that the Ministry is set to recommend the addition of certain provisions pertaining to the disclosure of such details given through corporate donations through the new Companies Bill.
Indian Legal News: New Norms Proposed to Increase ‘Shareholder’ Democracy
As per India legal news reports, Salman Khurshid, the Minister for Corporate Affairs, stated the need to bring in more transparency in the way political parties are funded by top business houses. Important questions, he pointed out, include questions, such as whom the company is funding, for what purpose and how much is permitted under the law, all of which will be addressed by the new proposed Companies Bill.
Khurshid also said that under the provisions of proposed law, a company will have to update its shareholders and investors, about the details of such donations. This will ensure better corporate governance and shareholder democracy. It will update company shareholders about important details, such as to whom the fund is given, how much money is given and for what purpose.
Currently, the draft of the proposed Companies Bill is under the scrutiny of the Parliamentary Standing Committee on Finance. The Committee will submit its recommendations to the Ministry of Corporate Affairs and these recommendations will be studied by the Ministry, following which it will be included in the existing Bill. It is likely that the Bill will be made a law by the year end.
Khurshid further stated that if this matter is not addressed in the new Companies Act, certain guidelines will be formulated pertaining to corporate donations to political parties.
According to the reports of India legal news, the current permissible limit for corporate donations is up to 5 percent of a company’s annual profit. It is mandatory to include this amount in the company’s profit and loss account. Also, such donations must be given with the permission of the company’s Board of Directors, through a proper resolution.
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