Charities and the EU Referendum

26 February 2016

Simon Steeden

Rosamund McCarthy

Summary

1. The EU Referendum

2. Charity law and campaigning

3. Company law and campaigning

4. Electoral law and campaigning

5. Questions

The Referendum Question

The EU Referendum

• Principally governed by the Political Parties, Elections and

Referendums Act 2000, the EU Referendum Act 2015 and further

regulations to be set by the Minister

• The Prime Minister has

set 23 June 2016

for the Referendum.

Interesting alliances...

Other elections in 2016

• Northern Ireland Assembly

• National Assembly for Wales

• Scottish Parliament

• London Assembly

• Mayor of London

• English local government

• Local mayoral elections

• Police and Crime Commissioner (England and Wales)

Charity Law and Campaigning

charitable purposes

Charity Law: Fundamental Principles

• Established for only

• Not charitable if political.

• Can campaign and undertake political activity.

• ONLY if supports delivering

• Not sole and continuing activity

• Never party political

• Must stress independence

Clear

Reasonable

Evidence

Basis

charitable purposes

Always be aware of your objects

Charity regulators’ guidance on campaigning

Charity Commission Guidance on campaigning generally –

CC9

Carefully consider CC9 and trustee risk analysis

Speaking out: guidance

on campaigning and

political activity by

charities

Campaigning

Political activity

Charity Commission supplementary guidance – ‘Charities,

Elections and Referendums’

• Acknowledges that ‘there may be some circumstances in which it is

appropriate for a charity to set out the pros and cons[...]for their

beneficiaries’

• BUT differentiates between that and actively campaigning for an outcome

• States that in exceptional cases outcome may directly affect charitable

objects

• Consider…

Is this referendum an exceptional case?

“Now in terms of the debate I think we need to have, obviously the politicians are going to play a big role in this debate [...] But I hope that business and NGOs and other organisations won’t hold back. [....] I think it’s important with this which is such a massively important generational question, for Britain and for Europe’

The Prime MinisterSpeech at World Economic Forum in Davos21 January 2016

How might charities be affected?

• Impact on objects?

• Prudent to take into account upcoming potential changes to the

environment in which the charity operates

• EU sources of funding?

• CC26 Charities and Risk management:

“An essential question for charities when considering risk it whether or not

they can continue to meet the needs of beneficiaries now and in the future.

For example, in a period of economic uncertainty, the major financial risks

for a charity are likely to be:

– termination of funding from other bodies

– the future of contracts

– fundraising from the general public

– fluctuations in investments”

Charity Commission guidance: Charity governance, finance and

resilience: 15 questions trustees should ask

Have any charities taken a view?

Have any charities taken a view?

“On the basis of our close engagement with EU policy over many years, we are keen to dispel some of the myths that have been put out concerning the true nature of the EU institutions, particularly by those campaigning for the UK to remain in the EU. To this end we present here a brief and balanced guide to the European Union: The Good, The Bad and The Ugly.”

“No one on the Left claims that the EU is currently fit for purpose”

“While it is appealing to call for reform from within, experience shows that there is no realistic chance of diverting the EU institutions away from the principles of capitalist rule that lie at the heart of the European project.”

Is the impact very indirect or uncertain?

• If so, Commission guidance suggests “the Trustees will find it difficult

to justify campaigning for a particular outcome”

• the legal basis for this test of “uncertainty” is not clear

Are the charity’s aims narrower than the potential impact?

• If so, Charity Commission guidance suggests that “Charities must

carefully consider what the justification is for campaigning[...]because

there is a risk of the charity being engaged in party political or

inappropriate political activity’

• Instead, we prefer the test outlined elsewhere in the Charity

Commission guidance:

“the key question for trustees is exactly how such an activity would

be an effective way of promoting the objects of the charity”

Is there a significant party political dimension?

• If so, charities will need to carefully consider justification for

campaigning – charities cannot engage in party political activity

• Broad spectrum of political opinion supporting both outcomes,

divisions in opinion even between political parties

• E.g.

- Cross party representation at major EU Referendum campaigning

groups

- Political parties split internally

- No clear alignment with political spectrum: e.g. Trade Union Socialist

Coalition and Socialist Workers Party supporting a leave vote

Is there a significant party political dimension?

Is there a significant party political dimension?

Charity Commission Guidance on Trustee Duties (CC3)

• In deciding whether to engage, and how, trustees must:

Act within their powers;

Act in good faith;

Make sure they are sufficiently informed;

Take account of all relevant factors and ignore irrelevant factors;

Make sure that their decision is within the range of decisions that a

reasonable trustee body could make; and

Deal appropriately with any conflicts of interest.

OSCR Guidance: The Scottish Referendum

Not necessarily inconsistent – difference in tone not law?

Steps to compliance under OSCR guidance?

Impact and risk assessment

Scenario planning to advance purposes in any event

Considering beneficiaries, supporters, donors and members

Board report and trustee discussions

A reasonable view, empirical evidence, expert advice

Always ensuring consistency with charitable purposes

How can Trustees come to a decision?

• Overall, the Trustees of the charity would need to be confident how and

why engaging with the referendum would be an effective way of

promoting the objects of the charity, be in the charity’s interests and

that the activity is not supporting/advancing a political party.

• The Charity Commission recently indicated that it thought charity

trustees should be in a position to work through these issues:

Sarah Atkinson, director of policy and communications at the Charity Commission, as quoted in Civil Society, 20 October 2015

“I think most charities instinctively understand how

to strike this balance.”

Company Law and Campaigning

Companies Act 2006 Part 14

Section 365

A company must not incur political expenditure without authorisation as

set out in the Companies Act 2006

Section 365(1)(b)(ii)

This includes activities that are

“capable of being reasonably regarded as intended…”

Objective

(wide)

“to influence voters in relation to any national or regional

referendum held under the law of a member State”

Necessary Companies Act authorisation

• Formal authorisation from company law members – ordinary

resolution (unless governing document specifies higher threshold)

• Applies to charitable companies (but not CIOs or unincorporated

charities)

• Similar test to Part VI PPERA (objective, wider test)

• Companies often choose to pass this resolution as a precautionary

measure

• Resolution must be in the format specified by Companies Act

• Broadly must authorise a maximum figure for political expenditure and

not authorise specific instances of expenditure)

Election Law and Campaigning

Election Law – The Legal Framework

Political Parties, Elections and

Referendums Act 2000

The European Union Referendum

Act 2015 (and regulations)

PPERA

The Act

What Is Regulated?

Test Intention

Subjective

Representation of

the People Act

1983

PPERA

Section 85“reasonably be

regarded as

intended to

promote or

procure electoral

success”

Contrast Same test

Objective

“with a view to promoting or procuring a

particular outcome or otherwise in

connection with promoting or procuring

any such outcome.”

Effect of Regulation

Must register as a ‘permitted participant’ if spend over £10,000

• Registration has been available since 1 February 2016

• Must specify outcome you are campaigning for when you register

Controls on spending and donations

Detailed reporting requirements

Rules on campaign material

Maximum spend £700,000

Register of permitted participants as at 22/02

Remain

• Conservatives for the Future

Ltd

• Green Party

• Liberal Democrats

• Mrs Katie Pruszynski

• Plaid Cymru

• SNP

• Stronger United Ltd

• The In Campaign Ltd

• UCATT (Union for workers in

the construction sector)

Leave

• Dr Richard North

• Global Britain Limited

• Grassroots Out Ltd

• Leave.EU Group Ltd

• TUSC (Trade Union and

Socialist Coalition)

• Vote Leave Limited

• UKIP

Spending: Referendum Expenses

Included

Unsolicited material sent to

electors

Referendum campaign

broadcasts

Advertising

Referendum materials

Market research and

canvassing

Events and rallies

Services and facilities connected

with media dealings

Transport connected with

obtaining publicity

Exceptions

Staff costs

Publication costs for media

(other than advertising)

Translations between

English and Welsh

Reasonable non-reimbursed

personal travel and

accommodation

Security at events

Reasonable disability costs

Key Differences from General Election Rules

• Subjective intention test

• Threshold for registration £10,000

• Maximum spend for registered non-party campaigner £700,000

• Staff costs excluded from referendum expenses

• Benefits available to designated campaigns

Reporting

All payments over £200 must have receipt

Periodic reporting periods

Final spending and donations reports

To the best of the responsible person’s knowledge and belief

Conviction or fine

Record and report all spending, donations and loans

Complex

So… Where A, B and C each spend £10,000.

All must record £30,000

“with a view to promoting or procuring a particular outcome”

Joint Campaigning: Expenses

“incurred in pursuance of a plan or other arrangement”

Designated lead campaign groups1. Higher spending limits

2. Free distribution of information to

voters

3. Referendum campaign broadcasts

4. Use of public roomsCommission power to determine

Are you working in coalition?

Excluded if by or on behalf of designated organisation

BUT

Each group’s entire coalition spending counts towards each members’ limit

Immaterial

whether

you are a

permitted

participant

Donations

Relevant donations (applies if you are a permitted participant or will

become one)

• Value over £500 (can include commercial value of things given for free or at

non-commercial rate)

• Only ‘permissible donors’ can give donations for referendum expenses –

must take all reasonable steps to check donor is permissible

• Can be a criminal offence to accept a donation that isn’t permissible

Reporting

• Total donations over £500 MUST be reported in post-poll returns

• Donations over £7,500 MUST be reported in the relevant period (pre-poll)

Including:

The amount donated

The date donation received

Information relating to identity of

the donor

What is a ‘permissible donor’?

Includes:

• Individuals registered on UK or Gibraltar electoral register

• UK/Gibraltar registered companies incorporated in EU and carrying on business in the

UK/Gibraltar

• UK or Gibraltar registered trade union

• UK or Gibraltar registered building society

• UK/Gibraltar registered LLP carrying on a business in the UK/Gibraltar

• UK registered friendly, industrial, provident or building society

• UK/Gibraltar based unincorporated association that carries on the majority of its business

or other activities in the UK/Gibraltar

• Royal charter incorporated bodies

• UK based CIO

• A Scottish partnership which carries on business in the UK

• Some types of trust

• CANNOT accept donations from UK political parties unless you are the designated lead

• CANNOT accept donations from non-UK European sources, i.e. European Commission

‘Purdah’ period/short campaign

• s. 125 PPERA restricts any minister, government department, local

authority or person or body whose expenses are defrayed wholly

or mainly from public funds or by any local authority

• Within 28 days before referendum date, cannot publish:

Material that provides general information about a referendum

Material that deals with any of the issues raised by any question on

which a referendum is held

Material that puts any arguments for or against a particular answer to

a referendum question

Material designed to encourage voting at a referendum

Imprints

• Imprints must be added to printed referendum material

• Must include name and address of

The printer, and

The promoter (person who has caused the material to be printed –

must also include name and address of organisation if acting on

behalf of an entity)

• Imprint must go on face of one sided documents, or first/last page of

multi sided document

• Not legal requirement but Electoral Commission state good practice

to include on electronic material too

Key considerations for charities

• Proper planning and consideration of the issues – not ‘accidentally’

taking a view

• Consider impact of referendum on charity’s future funding/risk

management?

• Consider whether trustees and senior spokespeople are involved in

referendum campaign

• Assess risks and develop approach to compliance

• Maintain records and audit trail

• Joint working risk area

• Clear link between charity’s purposes and engaging with referendum

Simon Steeden

s.steeden@bwbllp.com

Rosamund McCarthy

r.mccarthy@bwbllp.com

www.bwbllp.com

Get in touch...