Delve into the complexities of Corporate Funding in Elections. This blog unravels the intricacies, implications, and ethical considerations surrounding the financial backing of political campaigns by corporations.
Introduction
In the intricate landscape of Indian politics, the Representation of the People Act, 1951 (RPA) plays a pivotal role in shaping the functioning of political parties. Section 29A of the RPA mandates the registration of every association or body of individual citizens with the Election Commission (EC) to operate as a political party. This article delves into the nuanced aspects of corporate funding for political parties, exploring the legal intricacies and recent amendments.
The National Players
Before delving into the legal intricacies, it’s crucial to understand the political backdrop. National parties like the Bharatiya Janata Party (BJP), Indian National Congress (INC), Bahujan Samaj Party (BSP), Nationalist Congress Party (NCP), Communist Party of India (CPI), Communist Party of India (Marxist) (CPM), and All India Trinamool Congress (AITC) dominate the political landscape in India.
These parties, as per Section 2(h) of the Right to Information Act, 2005 (RTI Act), are considered ‘public authorities’ by the Central Information Commission (CIC), imposing obligations for transparency.
Public Authorities and Funding
The CIC’s decision to classify national political parties as public authorities is rooted in democratic principles. As entities striving to form the government and be accountable to citizens, they are expected to disclose information, especially regarding their funding sources. Section 29B of the RPA empowers political parties to accept voluntary contributions. However, transparency is paramount, and all registered political parties must file a contribution report with the EC.
The contribution report details donors who contribute above ₹20,000, including their name, address, PAN number, and mode of contribution. This ensures accountability and adherence to corporate funding conditions, particularly when corporations or eligible companies are contributors.
What is Corporate Funding of Elections?
Corporate funding of elections refers to the financial contributions made by corporations or business entities to support political parties, candidates, or electoral campaigns. This practice plays a significant role in shaping the financial landscape of political activities and influencing electoral outcomes.
Factors Affecting Corporate Funding of Elections
Here are key aspects to understand about corporate funding of elections:
Contribution to Political Parties:
Corporations may contribute funds directly to political parties registered with the Election Commission. These contributions are often aimed at supporting the ideologies, policies, or candidates endorsed by the respective political party.
Support for Candidates:
In addition to supporting political parties, corporations may provide financial assistance to individual candidates. This support can manifest in the form of campaign funds, advertising expenses, or other financial resources required for a candidate’s electoral campaign.
Regulatory Framework:
Corporate funding of elections is subject to legal regulations and guidelines. In India, for example, the Representation of the People Act, 1951, governs political contributions, and corporations are required to register with the Election Commission to function as political parties.
Disclosure Requirements:
Corporations making contributions to political parties are typically required to disclose details of these contributions. The disclosure may include information such as the amount contributed, mode of contribution, and the recipient political party.
Changes in Legislation:
Legislative changes can impact the landscape of corporate funding in elections. Amendments to laws, such as the Companies Act, may alter the permissible limits and conditions for corporate contributions to political activities.
Corporate Board Approval:
Before making any political contribution, corporations often require approval from their Board of Directors. This ensures a formal and deliberative process within the corporate governance structure.
Prohibitions and Restrictions:
Legal frameworks, such as Section 182 of the Companies Act, may impose prohibitions and restrictions on political contributions by corporations. The amendment to this section in the Finance Act, 2017, brought about changes in the thresholds and disclosure requirements.
Public Authority Status:
In some jurisdictions, political parties, including national parties, may be considered ‘public authorities.’ This designation, as seen in India under the Right to Information Act, can subject political parties to disclosure obligations and transparency measures.
Contribution Report:
Corporations are required to file a contribution report with the Election Commission, detailing contributions made to political parties. This report includes information about donors, their addresses, PAN numbers, and the mode of contribution.
Evolution of Corporate Funding:
The landscape of corporate funding in elections evolves over time with changes in laws, societal expectations, and corporate governance practices. Understanding these changes is crucial for both corporations and the political landscape.
Corporate Funding: Legal Framework
Recent amendments in Section 182 of the Companies Act, 2013, have significant implications for corporate contributions to political parties. Before the amendment, companies not categorized as Government companies and in existence for at least three years were subject to a cap on contributions, not exceeding 7.5% of their average net profits in the preceding three years.
The Finance Act of 2017 brought about crucial changes. Firstly, the 7.5% threshold was eliminated, removing any restrictions on the amount eligible companies could contribute. This newfound flexibility empowers corporations to play a more substantial role in political funding.
Secondly, eligible companies are now required to disclose their total contributions to political parties in their profit and loss statements. The mode of contribution has also evolved, allowing companies to contribute through various instruments issued under existing laws.
The amended provision, however, omitted the explicit requirement to disclose the name of the political party receiving the contribution. This alteration has stirred debates about transparency and accountability in political funding.
Conclusion
As India’s political landscape evolves, understanding the intricacies of corporate funding is essential for maintaining transparency and accountability. The recent amendments have reshaped the dynamics, removing certain restrictions and providing greater flexibility for corporations to contribute. However, the absence of a mandate to disclose the recipient party’s name raises questions about transparency.
For individuals seeking legal advice on these matters, our doors are always open. Feel free to reach out with your thoughts, feedback, or inquiries, either by contacting us directly or leaving a comment below. As we navigate the complex nexus of law and politics, staying informed and engaged is crucial for a robust democratic system.
FAQs on Corporate Funding and Political Parties in India
What is the total declared income of national political parties for the financial year 2017 – 2018?
As per the Association for Democratic Reforms, the total declared income of all national parties for the financial year 2017 – 2018 amounted to ₹1,198.75 crores.
Which national parties fall under the purview of being considered 'public authorities' as per the Right to Information Act, 2005?
National political parties such as Bharatiya Janata Party (BJP), Indian National Congress (INC), Bahujan Samaj Party (BSP), Nationalist Congress Party (NCP), Communist Party of India (CPI), Communist Party of India (Marxist) (CPM), and All India Trinamool Congress (AITC) are considered 'public authorities.'
Are political parties mandated to disclose details of corporate funding?
Yes, political parties are required to file a contribution report with the Election Commission, including details of donors contributing above ₹20,000. The report includes names, addresses, PAN numbers, and modes of contribution.
What recent changes in law relate to corporate funding of elections in India?
The amendment to Section 182 of the Companies Act, 2013, via the Finance Act, 2017, removed the 7.5% threshold on the amount eligible companies could contribute to political parties. There is no longer a bar on the amount that can be contributed by a corporation.
What disclosure requirements do eligible companies have regarding political contributions?
Eligible companies are required to disclose total contributions to political parties in their profit and loss statement. Contributions can be made through various instruments, and the name of the party is not explicitly required to be disclosed.
Where can I find the contribution report filed by a specific political party?
You can find contribution reports on the official website of the Election Commission or through respective political party websites for the specific financial year.
What are the basic requirements for a corporate entity before contributing to a political party?
Approval of the Board of Directors is mandatory before making any political contribution. Eligible companies must adhere to the disclosure requirements and can contribute through various instruments.
How can I seek legal advice regarding political funding or related matters?
If you need legal advice, feel free to contact the experts at Vakilsearch. You can leave your thoughts or feedback by commenting below or reaching out to us directly.
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