Companies Act_Practical Problems_76

The Board of Directors of Sun Star Ltd. are contributing every year to a charitable
organization a sum of Rs.1 lac. In a particular year, the company suffered losses and the directors are contemplating to contribute the said amount in spite of the losses. In this connection, state whether the directors can do so?

The power to donate to general charities is not conditional to existence of any profit. In such a case they may contribute up to the limit given in Section. 293(1) (e), even though the company may be working at a loss. Under the section a public company can contribute in any financial year not exceeding Rs 50,000 or 5% of its average net profits during the three preceding financial years whichever is greater.