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Companies Act 2006

Section 369: Liability of directors in case of unauthorised donation or expenditure

622.This section imposes civil liability on directors where unauthorised donations are made or unauthorised political expenditure is incurred. The liabilities are owed to the company and may be pursued in the normal manner by the company; that is they may be pursued by the directors in the exercise of the management powers conferred by the articles of association. The directors will be subject to the general duties set out in Chapter 2 of Part 10 in the conduct of the company's business. In addition, section 370 provides for enforcement by shareholder action.

623.The section largely reproduces the effect of section 347F of the 1985 Act, but:

  • only a director of the company and of a “relevant holding company” may be liable in respect of an unauthorised donation or unauthorised expenditure. This reflects the new rules relating to the authorisation of donations or expenditure by subsidiaries in section 366;

  • directors of the “relevant holding company” will not be liable for an unauthorised political donation or unauthorised political expenditure by a subsidiary if they took “all reasonable steps to prevent the donation being made or the expenditure being incurred”.

624.The conditions under which directors may be exempted from liability (currently set out in section 347H of the 1985 Act) are not reproduced in the new regime.

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