Section 181 of the Companies Act, 2013 prescribes that the Board of Directors of a company may contribute to bona fide and charitable funds and other funds. However, prior permission of the company in general meeting is required for such contribution in case any amount the aggregate of which, in any financial year, exceeds five percent of its average net profits for the three immediately preceding financial year. Any contribution made by a company registered under Companies Act has to be reflected in the Accounts of the company. Government has not received any suggestion from any quarter to change this standard accounting practice.

This information was given by Smt. Nirmala Sitharaman, MoS in the Ministry of Corporate Affairs in written reply to a question in the Lok Sabha today.

Corporate contributions require shareholder approval when statutory thresholds are exceeded and must be disclosed in company accounts. Section 181 authorises the Board of Directors to contribute to bona fide charitable and other funds but requires prior shareholder approval where the aggregate contribution in any financial year exceeds five percent of the company's average net profits for the three immediately preceding financial years. All contributions by a registered company must be reflected in the company's accounts, ensuring mandatory disclosure and accounting compliance.