The outcome of the EU referendum remains unpredictable and, given the stakes at play, many companies have not shied away from voicing their opinions on the implications of a potential “Brexit”. However, from Friday 15 April 2016, until polling day on 23 June 2016, companies will not be able to spend more than £10,000 in relation to “campaign activities” unless they have registered with the Electoral Commission.
Campaign spending rules
There is a two stage test for identifying the activities that are deemed to count towards campaign spending:
- Does the activity in question fall within a designated list of activities (including advertising of any kind, unsolicited letters/leaflets sent to voters, events and rallies); and
- Are those activities intended to, or are otherwise in connection with, promoting or bringing about a particular outcome in the referendum?
If the answer to both of the above questions is yes, the activity is considered a “campaign activity” and the spending in relation to the activity will count towards the £10,000 limit. If a company wishes to spend over £10,000 in relation to “campaign activities” it must register with the Electoral Commission to become a “permitted participant”. “Permitted participants” can spend up to £700,000 and are subject to a number of reporting obligations. An organisation or company can register to become a “permitted participant” at any point (including after 15 April 2016) and registration is free.
Consequences of non-compliance
A company that incurs over £10,000 in relation to “campaign activities” from 15 April 2016 without registering with the Electoral Commission and knows that the expenses were being incurred in relation to such activities risks being investigated by the Electoral Commission and may be committing a criminal offence. Both the company and the individual who authorised the spending on behalf of the company can be found guilty of the offence which carries a maximum penalty of 12 months’ imprisonment and/or a fine.
What do the regulations mean in practice?
The low spending threshold makes the distinction between activities carried out in the normal course of business and regulated “campaign activities” especially important.
Some examples of business activities that risk being considered “campaign activities” include the following:
- holding internal and external events and press conferences in relation to the merits or otherwise of EU membership if the speaker supports a particular outcome in the referendum;
- creating and disseminating unsolicited publications or materials that are circulated either internally or externally and contain a view on the implications of a potential “Brexit”; and
- producing a website or a YouTube video that contains a view on the implications of a potential “Brexit”.
Whether or not the information being provided by the company has been solicited is a key factor in determining whether the spending associated with the relevant activity will count towards the £10,000 limit. Research that is either solicited or produced in the regular course of business may therefore not be caught by the regulations.
Businesses will need to ensure they keep an accurate record of all spending in relation to potential “campaign activities”. A simple compliance framework can reduce the risk of inadvertently breaching the £10,000 spending limit and could include the following:
- internal training to educate those employees most at risk of engaging in “campaign activities”;
- designation of one individual within the company through whom all referendum related communications must pass which will make it easier to keep an audit trail;
- keeping a log of all referendum-related activities and related expenditure (whether or not they are classed as “campaign activities)
- adoption and circulation of the company’s policy on “campaign activities”; and
- avoidance of situations in which the company coordinates or works together with another party that may be engaged in “campaign activities”.
Get in touch
BLP has significant experience in advising clients on the potential implications of a “Brexit”. Please get in touch if you would like to discuss whether particular activities fall within the restrictions on referendum spending, registration to become a “permitted participant” or any other issues your organisation is facing in relation to a potential “Brexit”.