Referring to the provisions of the Companies Act, 2013, examine the validity of each of the following contributions : (i) The Board of directors of Laxmi Ltd. decides to contribute to charitable funds, a sum of 10% of th

(i) Charitable Contributions According to Section 181, the Board of Directors of a company may contribute to bona fide charitable and other funds: Provided that prior permission of the company in general meeting shall be required for such contribution in case any amount the aggregate of which, in any financial year, exceed 5% of its average profits for the 3 immediately preceding financial years. Accordingly, the Company in this case can contribute the said contribution only by prior permission by way a resolution passed by the general meeting of the members. As the permissible limit is 5% of average net profits for three immediately preceding financial years. (ii) Political Contributions Further, according to Section 182(1), the following companies are barred from making political Contributions: Government company The company which has been in existence for less than 3 financial years. Provided that the aggregate of the amount which may be so contributed by the company in any financial year shall not exceed seven and a half percent of its average net profits during the 3 immediately preceding financial years: Provided further that no such contribution shall be made by a company unless a resolution authorizing the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, subject to the other provisions of this section, be deemed to be justification in law for making and the acceptance of the contribution authorized by it. The decision of the Board in the given is also violative of the provisions of the Companies Act, 2013 viz. (i) the company has been in existence for less than one year and (ii) the contribution to be made is beyond the limit of 7-1/2%. Therefore, the company cannot pay the said contribution.