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Company Law Reform Bill [HL]

We have tabled two amendments in this group, Amendments Nos. 301ZZE and 301ZZF. They address the second half of the point made by the noble Lord, Lord Razzall—the meaning of ““political expenditure”” in Clause 338(1). We are concerned that the definition of political expenditure made in the Bill, as set out in Clause 338(1), is so wide that it could catch expenditure on a single issue directly affecting a company where any political inferences are purely incidental. Our amendments would remove ““intended to affect”” and replace it with,"““having the direct intention of affecting””," and remove ““intended”” to replace it with ““having the direct intention””. In our view, companies should not be prevented or inhibited from taking action if an issue comes up where their prime concern is clearly the protection of a particular business interest. To fail to do so would mean that the directors were neglecting their duties, which we have newly codified under Clause 156. As it stands, the definition is very wide. Perhaps I may best give an illustration of that. A company might wish to expand its operations on a particular site. The expansion might require buildings to be constructed, for which planning permission would be needed. To grant planning permission might be controversial in local terms, with political parties taking opposing views on whether such permission should be given. To fulfil their duties to,"““promote the success of the company for the benefit of its members as a whole””," as set out in Clause 156(1), the directors may decide to engage in a vigorous PR and advertising campaign to rally support for their plans. In the context of a decision about which local political parties disagree, it could be argued that such actions are,"““capable of being reasonably regarded as intended to affect public support for . . . a political party””," as the clause states. If you wanted to add a further complication, you could say that that might all take place in the context of a fiercely fought local election . The amendments are aimed to limit the definition of political expenditure to those outlays by companies where political activity is the prime objective, not simply an incidental by-product of the directors’ wish to fulfil their duties under Clause 156(1).