---

Company Law Reform Bill [HL]

We believe it is essential that political donations or expenditure by subsidiary companies are authorised by the members of the holding company highest up the chain which is a ““UK company””. Failure to achieve this would drive a coach and horses through the authorisation regime by permitting holding companies to circumvent the requirements by making a political donation or incurring political expenditure through subsidiary companies. The corollary of this is that directors of such holding companies must be liable if subsidiaries make unauthorised political donations or incur unauthorised political expenditure. I understand the concern that the directors of holding companies may be either ignorant of such matters or impotent to stop them, but I do not believe that this will cause difficulties in practice. In particular, I remind the Committee—the noble Lord, Lord Razzall, pre-empted this point—that Part 14 will permit the ratification of breaches of these rules. It is our intention that directors will also be able to apply to the court for relief under Clause 759 if they believe that they have acted honestly and reasonably and, having regard to all the circumstances of the case, ought fairly to be excused. It is a case of striking a balance between making sure that holding companies have to authorise these matters, but recognising that directors of the holding company may be unaware of that. However, there are provisions to deal with that. That is where we think the balance properly and fairly lies.