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Political Parties, Elections and Referendums Act 2000

Section 347F : Remedies for breach of prohibitions on company donations etc.

263.Section 347F sets out civil remedies in relation to the making of donations or the incurring of political expenditure without the required approval of shareholders (“unauthorised transactions”). The remedies are to be available to a company and are to be pursued in the normal manner by the company; i.e. they will be pursued by the directors in the exercise of the management powers conferred by the articles of association, who will be subject to the various fiduciary and other duties applicable to directors in the conduct of the company’s business.

264.Subsections (2) and (4) provide that, where a company has engaged in an unauthorised transaction, the company is to have a statutory right to recover the amount of the donation or expenditure jointly and severally from the directors of the company (including for this purpose shadow directors) in office at the time the transaction was entered into. The company is also to have a statutory right to recover damages for any harm caused to the company by the unauthorised transaction e.g. if it is established that the unfavourable publicity surrounding an unauthorised transaction caused a loss of business to the company. Under subsection (3), the company is also entitled to interest on the amount of the unauthorised expenditure from the time of the unauthorised transaction until the amount is repaid at a rate to be prescribed by the Secretary of State by regulations subject to the negative procedure.

265.Subsection (6) provides that, where the company entering into an unauthorised transaction is a subsidiary of a holding company incorporated in Great Britain, that holding company is to have equivalent rights of action to those of the subsidiary itself against the directors of the holding company at the time the subsidiary entered into the unauthorised transaction. Again the liability is to be joint and several and is to include shadow directors and to be on the same terms as the actions vesting in the subsidiary company itself.

266.Subsection (8) disapplies the general power of the court under section 727 of the Companies Act (to grant relief to directors in breach of their duty) to liability arising under this section.

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