Political Donations and Expenditure
The changes to the provisions on political donations and expenditure from the 1985 Act are largely deregulatory, making it easier for companies to seek shareholder authorisation. The following are deregulatory changes:
- A holding company must authorise a donation or expenditure by a subsidiary company only if it is a “relevant holding company” (that is, the ultimate holding company or, where such a company is not a “UK-registered company”, the holding company highest up the chain which is a “UK-registered company”).
- A holding company is permitted to seek authorisation of donations and expenditure in respect of both the holding company itself and one or more subsidiaries (including wholly-owned subsidiaries) through a single approval resolution;
- Companies are permitted to table separate approval resolutions in respect of donations to political parties and donations to other political organisations;
- There is an exemption for donations to trade unions to provide greater clarity for companies about the provision of facilities, such as meeting rooms, for trade union officials.
Other key changes are that:
- Companies are required to seek authorisation for donations and expenditure in relation to independent candidates at any election to public office held in the UK or other EU member state;
- The new provisions apply to Northern Ireland.
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1 October 2007 in Great Britain and on 1 November 2007 in Northern Ireland. More details are in the table below.
| 1 October 2007 |
Commencement of Part 14 for GB (except independent election candidates) |
| 1 November 2007 |
Commencement of Part 14 for NI (except independent election candidates) |
| 6 April 2008 |
Commencement of Part 15 for UK.
Directors’ reports for financial years starting on or after this date to include disclosure of political donations/expenditure (including independent election candidates) |
| 1 October 2008 |
Commencement of ‘independent election candidates’ provisions in Part 14 |
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In most cases, yes. Companies will not have to pass new resolutions authorising political donations and expenditure, unless the existing resolution has expired or is due to expire; they are planning to make a donation or incur expenditure in the near future and do not already have shareholder authorisation; or (after 1 October 2008) the resolution does not cover independent election candidates and the company is making donations or incurring expenditure in relation to them.
A transitional arrangement has been provided so that resolutions passed before 1 October 2007 do not have to comply with the requirement to authorise donations or expenditure under the specific heads as outlined in section 367(3) of the 2006 Act. Accordingly, they will remain valid until their expiry date. After such a resolution has expired, section 367(3) requires the new resolution to authorise donations or expenditure under one or more of the following heads: donations to political parties or independent election candidates; donations to political organisations other than political parties; or political expenditure.
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Yes. A director is liable to his company for an unauthorised donation made before 1 October 07 if it did not meet the requirements of the 1985 Act. The liability under the 1985 Act for that unauthorised donation continues after 1 October 07.
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For directors' reports relating to financial years beginning on or after 6 April 2008 companies will be required to disclose details of donations to independent election candidates in their directors' reports made under the Companies Act 2006. Regulations specifying the content of the directors' report will be commenced at the same time as the other provisions and statutory instruments on accounts and reports (in Part 15 of the 2006 Act) ie on 6 April 2008 for financial years beginning on or after that date. For financial years beginning before 6 April 2008 the existing provisions in paragraphs 3 and 4 of Schedule 7 to the Companies Act 1985 will continue to apply.
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No. If an unauthorised donation was made before 1 October 07, it is the provisions of the 1985 Act which dictate if a director is liable. The 1985 Act did not provide for the liability of directors of holding companies in relation to political donations made by subsidiaries. Therefore, the shareholders could not take action in relation to a donation made before 1 October 07 on the basis of the 2006 Act provisions which impose liability on directors of holding companies in relation to political donations made by subsidiaries.
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In relation to unauthorised donations or expenditure made before or after 1 October 2007, it is now much simpler under the 2006 Act to ratify unauthorised donations or expenditure. Like other acts of directors which give rise to liability, such unauthorised donations or expenditure may, after 1 October 07, be ratified under section 239 of the 2006 Act.
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The Electoral Commission publishes guidance for companies on political donations. Go to http://www.electoralcommission.org.uk/regulatory-issues/formsandgnpolparty.cfm
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The Order exempts companies whose ordinary business includes the publication of news (such as newspapers, and other publishing or media-related companies) from having to seek shareholder authorisation in order to prepare, publish, or disseminate material of a political nature. This is because it would be impractical for them to have to comply with the provisions on political expenditure in Part 14 of the Companies Act 2006 for something which is within the ordinary course of their business.
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This Order replaces rewrites the existing Order SI 2001/445 using simpler language and the format of the 2006 Act, with no changes to the substance.
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The meaning of political expenditure is given in Article 3 of the Order, and means anything that a company spends on preparing, publishing or disseminating material that could affect support for a political party or candidate.
Companies such as newspapers will not need to seek shareholder authorisation for expenditure incurred in preparing, publishing or disseminating advertisements from third parties which could affect public support for a political party or influence voters.
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1 October 2007 along with the provisions in Part 14 of the Companies Act 2006.
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