Restrictions on ‑ Whether compliance of clause (e) of sub‑section (1) obligatory where contributions are in the form of shares - Companies Law - Letter : No. 12/13/60‑PR(S),

Letter : No. 12/13/60 ‑ PR(S), Dated 18 ‑ 3 ‑ 1960. Subject:- Restrictions on ‑ Whether compliance of clause (e) of sub‑section (1) obligatory where contributions are in the form of shares The provisions of section 293(1) require the board of directors of a public company, or of a private company which is subsidiary of a public company, to obtain the consent of the company in general meeting, in case the amount of contribution made by the company to any charitable and other funds in any financial year exceeds the ceiling prescribed in clause (e). In this connection it has been brought to the notice of this Department that there is a tendency among some companies to make contributions in the form of fully paid‑up shares (held by them in other companies) instead of in cash. Such a practice has been particularly noticed in a prominent and well‑known group of companies which generally donate in the shape of shares to their own charity trusts. Although no objection need be taken to this arrangement so long as the amount represented by the shares donated does not exceed the prescribed ceiling and the statutory requirements are duly complied with in this regard, the Department would like to ensure that the statutory ceilings are not circumvented by intentional under‑valuation of shares on the part of companies.