A three-year old producer company wants to donate some amount. Advise the company as to how and for what purposes such donation can be made. What are the monetary restrictions in this regard? In this context you are also

Section 581ZH of the Companies Act, 1956 states that a producer company may by special resolution, make donation or subscription to any institution or individual for the following purposes: promoting the social and economic welfare of Producer Members or producer or general public; or promoting the mutual assistance principles. The first proviso lays down the monetary limit for making donation. The aggregate amount of all such donation and subscription in any financial year shall not exceed 3% of net profits of the producer company in the financial year immediately preceding the financial year in which donation or subscription was made. Since the net profit of Producer Company in the last year was ₹12 Lakh, it can make a total donation of ₹36,000 in this year, being 3% thereof.