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Companies Bill [HL]

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 212. The funding of political parties is important and rightly concerns noble Lords on both sides of the House. The company law interest in this area arises from the possibility that a director might put his personal interests or those of a political organisation ahead of the interests of the company. In other words, a director might have a conflict of interest when making a political donation or incurring political expenditure. These provisions, therefore, have an important but limited purpose. Company law would of course not be an appropriate vehicle for delivering wider policy objectives in relation to political funding. Clause 353 provides that a trade union is not a political organisation for the purposes of Part 14. This means that funding from a company for a trade union, such as the provision of a meeting room or use of a company car, cannot be considered as a political donation requiring the authorisation of the company's shareholders. However, concern was expressed in another place that this provision might allow companies to circumvent the Bill’s requirements for authorisation by making donations to the political fund of a trade union in the expectation that the trade union would make a donation to a political party. In response to those concerns we propose to replace Clause 353 with a new clause that would require shareholder authorisation of donations made to the political fund of a trade union, but not of other donations made to the union. This will prevent companies circumventing the controls of the Bill. There is no danger of donations other than to a political fund being redirected to political parties, because the Trade Union and Labour Relations (Consolidation) Act 1992 prevents trade unions making payments to political parties, except through their political fund. That Act also prohibits trade unions from redirecting money received from third parties into the political fund unless the money is given as a contribution to the political fund. I should make clear that we are not aware of any companies making donations to trade unions as a means of circumventing requirements applicable to political donations in that way. This amendment will ensure that it is not even a possibility in the future. Amendments Nos. 219 to 223 address an issue that was raised in another place. Under Clause 353, the directors of both a subsidiary company and of its ““relevant holding company”” may be liable if an unauthorised donation is made by a subsidiary. Clause 354 recognises the possibility that neither the holding company nor the subsidiary itself may bring an action against the directors who are liable in respect of the unauthorised donation. It therefore allows shareholders to bring legal proceedings to enforce that liability. In such cases, we agree that both shareholders of the subsidiary and shareholders of the holding company should be able to bring proceedings. This is particularly important if the directors of the holding company are effectively the shareholders of the subsidiary; for example, if it is a wholly-owned subsidiary. The clause as currently drafted would allow only shareholders of the subsidiary to bring proceedings, even against directors of the holding company. As I explained, we do not think that this will work in practice. These amendments address the problem and give the right to bring these proceedings to shareholders both of the subsidiary and of the holding company. This will ensure that directors of holding companies can be held to account by their shareholders if they use subsidiaries that they control to make unauthorised donations. Amendments Nos. 212 and 217 make minor drafting amendments to Clauses 348 and 352. These amendments are consequential on AmendmentNo. 918, which inserts a new clause providing definitions of ““subsidiary”” and ““holding company””. Amendments Nos. 226 and 227 provide greater clarity, and we are grateful to the Opposition for suggesting those changes. Moved, That the House do agree with the Commons in their Amendment No. 212.—(Lord McKenzie of Luton.) On Question, Motion agreed to.