With the EU referendum campaign entering its final stages and business leaders entering into the debate, are there any legal limits on what a company can do to promote its view?

Referenda in the UK are tightly regulated. Between 15 April and 23 June, if a company spends £10,000 or more on "referendum expenditure", it must register with the Electoral Commission. "Referendum expenditure" is spending in connection with promoting or procuring a particular outcome in the referendum.

If a company does not want to register it will need to be careful, keeping in mind that certain activities might amount to referendum expenditure. Companies should keep track of their spending to make sure they stay within the limit.

The Cabinet Office's guidance 'Companies and the EU Referendum Period' helps companies understand what sorts of things might count towards the referendum expenditure limit.

The guidance covers:

  • the extent to which internal communications (e.g. with staff, customers and shareholders) would count as referendum expenditure;
  • making public statements via the media;
  • expressing views in a company's annual report or at an AGM;
  • hosting a government minister or a representative from one of the designated campaigns; and
  • hosting a public meeting or industry event where Brexit will be discussed.

The guidance notes:

  • merely presenting objective and factual information on the risks and benefits to the company of an in/out decision does not involve referendum expenditure;
  • any related costs of an activity advocating a particular outcome or seeking to influence voting would count towards referendum expenditure;
  • staff costs, for example internal emails advocating a particular outcome, do not count towards referendum expenditure;
  • there is a special exception from referendum expenditure for publications (other than adverts) in newspapers and periodicals and in broadcasts made by specified broadcasters;
  • a company can "split" the costs if only part of an activity involves referendum expenditure (e.g. if part of its annual report seeks to influence voting, but most of the report concerns other matters);
  • an opinion expressed by a director in response to an unprompted question at an AGM does not cause the company to incur referendum expenditure;if a company hosts a government minister for a non-Brexit matter, and the minister happens to be asked for their view on Brexit, the costs of the whole event would not then become referendum expenditure; and
  • the costs of hosting a public meeting on the referendum would only count towards referendum expenditure if it was promoting one side of the debate over the other.

Finally, companies should remember that there are additional company law rules affecting political donations and expenditure.Shareholder approval will almost always be required.Companies should take extra care in this area and seek legal advice if necessary.

For further detail, read this article by Shuna Stirling, Brodies' Head of Corporate, or browse our other articles and information about the EU Referendum.

Contributor

Stephanie Barratt

Associate