Sometime soon, British voters will go to the polls to make a momentous decision: whether the United Kingdom should withdraw from the European Union. While the date for the “Brexit” referendum has yet to be definitively set, there are indications it will be held in late 2016. The vote is likely to be hotly contested, with some recent polls showing a narrow majority of voters in favor of exiting from the European Union.
Brexit is a significant issue for companies that do business in the UK and the rest of Europe. A recent survey of British firms by the Institute of Chartered Secretaries and Administrators (ICSA) and the Financial Times found that 70 percent of respondents expected either “some” or “significant” damage to their business if the United Kingdom leaves the EU.
While companies may feel the urge to take a public stand on Brexit, communications on the issue can trigger complex UK election laws. These laws would require companies who incur more than £10,000 in expenses communicating for or against the referendum to register with the Electoral Commission and file reports. Because the law takes a broad approach to calculating expenses, companies need to have a compliance framework in place that addresses communications relating to the referendum during the regulated period.
Here are a few other considerations to keep in mind when developing a corporate strategy around Brexit:
- Past Practice May Not Be Precedent: The Brexit referendum is subject to a different regulatory scheme than last year’s UK general election. As a result, compliance strategies that were successful in 2015 may not work for the referendum. Among the key differences is that the “public/purpose” framework for determining whether an expenditure was a covered expense in the general election context is not the test for determining whether an expenditure is a covered expense for the EU referendum.
- Plan Ahead: The law’s broad approach to calculating referendum expenses and the relatively low threshold means that companies will need to have a clear compliance framework in place before the regulated period begins. This may include trainings for senior executives and communication staff, who should be aware that issuing corporate communications relating to the referendum can have significant legal consequences.
- It’s Not Always Better Together: The law also takes a broad approach to aggregating expenses among companies or other entities that work together on referendum issues. Consequently, working with others can create additional registration and reporting obligations for your company.