Introduction Schedule 2: Control of loans etc to permitted participants
86. Schedule 2 sets out in detail the arrangements that are to apply for the regulation of loans and other transactions involving permitted participants who are either not registered political parties or are minor parties. Part 4A of the 2000 Act already provides for the regulation of loans and other regulated transactions involving registered political parties who are not minor parties.
87. Paragraph 1 modifies the 2000 Act to treat as inserted a new Schedule 15A to the 2000 Act. Paragraph 2 of new Schedule 15A defines a regulated transaction as an agreement by someone to lend money or provide credit to a permitted participant, where the permitted participant intends to use all or part of the money to meet referendum expenses. An agreement of this type may also be supplemented by a "connected transaction", where a third party provides security to the lender. In this case the connected transaction is considered to be a regulated transaction. Under paragraph 2(12) of new Schedule 15A, agreements of a value of £500 or less or that are already covered by the donations provisions do not count as regulated transactions.
88. Paragraph 3 of new Schedule 15A concerns the value of regulated transactions. Where the transaction is a loan, the value is the total amount of the money to be lent under the loan agreement. Where the transaction is a credit facility, the value is the maximum credit limit. Both of these exclude any interest provisions in the agreement. Where the transaction is an arrangement to give any form of security, the value is the contingent liability under the security.
89. Paragraph 4 of new Schedule 15A prohibits a permitted participant from being party to a regulated transaction with anyone who is not a qualifying person. A qualifying person is a permissible donor falling within section 54(2) of the 2000 Act, a body incorporated by Royal Charter, a Charitable Incorporated Association, a Scottish or Northern Irish Charitable Incorporated Association, a Scottish Partnership, a Gibraltar elector, or an individual or body that is a permissible Gibraltar based donor within section 54(2A)(b)-(g) of the 2000 Act. However, a registered political party, or a political party established in Gibraltar which is not registered, is a qualifying person only in relation to a transaction entered into by a designated lead campaigner.
90. Under paragraph 5 of new Schedule 15A, any regulated transaction between a permitted participant and a non-qualifying person is void. Any money received under the transaction must be repaid, along with any interest due. If the money is not repaid, the Electoral Commission may apply to the court to make an order to return the money or discharge any security, with the effect that both parties return to the position they would have been in if the transaction had never been entered into.
91. Paragraph 6 of new Schedule 15A provides that where a connected transaction involves a non-qualifying person providing security, both the regulated transaction and the connected transaction are void. If the lender is unable to recover the full amount owed by the permitted participant, they may recover such sums from the third party.
92. Paragraph 7 of new Schedule 15A provides that any attempt by a qualifying person to transfer their interest in a regulated transaction to a non-qualifying person is of no effect.
93. Paragraphs 8 to 12 of new Schedule 15A set out offences related to regulated transactions. Paragraph 13(1) of new Schedule 15A provides that references in Part 3 of the Schedule (Offences) to permitted participants entering into a regulated transaction includes circumstances where the terms of the regulated transaction change to increase the amount of money that can be received by the permitted participant. Paragraph 13(2) of new Schedule 15A has the effect that it is an offence for a permitted participant knowingly to receive money under a loan or other regulated transaction from a person who has ceased to be a qualifying person, or to fail to repay money received under a loan or other regulated transaction from a person who has ceased to be a qualifying person after becoming aware the person has so ceased. Paragraph 14 of new Schedule 15A sets out the associated penalties for the offences in paragraphs 8 to 12 of new Schedule 15A.
94. Paragraph 15 of new Schedule 15A sets out the requirement for permitted participants to include regulated transactions in the statements prepared for the Electoral Commission under section 120 of the 2000 Act. The transaction need only be included in the return (and is only a "recordable transaction") where the value exceeds £7,500, or where the aggregate value of the transaction and any other relevant benefits exceeds £7,500.
95. Paragraphs 16 and 17 of new Schedule 15A set out the information that must be recorded in the statement prepared under section 120 of the 2000 Act in relation to each recordable transaction to which a qualifying person (paragraph 16) and a non-qualifying person (paragraph 17) was a party. Paragraph 18 of new Schedule 15A establishes that the statement must also include details of the transaction in line with Schedule 6A to the 2000 Act (which deals with transaction reports prepared by registered political parties), subject to the modifications made under sub-paragraph (2) and any other necessary modifications.
96. Under paragraph 19 of new Schedule 15A, where there is any change to the agreement, such as another qualifying person becoming party to it, the information from before and after the change must be included in the statement, as well as the date the change was made. Where the loan has been repaid in full or the debt released this information must be included.
97. Paragraph 20 of new Schedule 15A requires that the statement required under section 120 of the 2000 Act also include the total value of regulated transactions that are not recordable.
98. Paragraph 21 of new Schedule 15A deals with a situation where the court, on application by the Commission, is satisfied that a failure to comply with any requirement under Part 4 of the Schedule (the reporting Part) was caused by a person attempting to conceal the existence of, or true value of, the transaction. In this case, the court may make an order which will return the parties to the same position as if the transaction had never been entered into. Paragraph 22 of new Schedule 15A makes provision in relation to court proceedings under paragraph 5(4) or 21 of new Schedule 15A.
99. Paragraph 23 of new Schedule 15A establishes that the reporting requirements for permitted participants in relation to regulated transactions apply, if a permitted participant is party to a transaction under paragraph 2(3)(a) of new Schedule 15A, as if it were a party to the connected transaction.
100. Paragraph 2(1) of Schedule 2 modifies section 120 of the 2000 Act to require that the returns under that section include a statement of regulated transactions entered into. Paragraph 2(2) modifies section 123 of the 2000 Act to require the declaration by the responsible person to include information about regulated transactions entered into by the permitted participant. Paragraph 2(3) modifies section 124 of the 2000 Act so that a return in relation to a regulated transaction with an individual does not include the individual's address when published by the Electoral Commission. Paragraphs 2(4) and (5) make consequential modifications to Schedule 15 to the 2000 Act as a result of the inclusion of new Schedule 15A. Paragraph 2(6) ensures that loans to, or discharges of a liability of, permitted participants by unincorporated associations are treated as political contributions for the purposes of Schedule 19A to the 2000 Act. Paragraph 2(7) establishes that civil sanctions under Schedule 19C to the 2000 Act can be applied to the offences in paragraph 8 to 11 of new Schedule 15A. References in sub-paragraphs (6) or (7) in relation to Schedules 19A and 19C to the 2000 Act do not extend or apply those Schedules to Gibraltar (sub-paragraph (8)).
101. Paragraphs 3 and 4 provide for the reporting requirements of new Schedule 15A to apply to certain transactions entered into by a person before becoming a permitted participant (whether before or after commencement of paragraph 1 of Schedule 2) that are varied after they become a permitted participant to increase the amount of money under the transaction.
102. Paragraphs 5 to 8 provide for a pre-poll reporting regime for regulated transactions (including connected transactions) involving permitted participants (that are either not registered parties or are minor parties) in line with the regime for pre-poll reporting of donations as provided for by paragraphs 39 to 42 of Schedule 1.
103. Paragraph 9 establishes that certain other provisions in the 2000 Act apply in relation to the requirements and offences in Schedule 2. Sub-paragraph (6) makes clear that Schedules 19B and 19C to the 2000 Act are not extended or applied to Gibraltar.
104. Paragraphs 10 and 11 provide that a registered political party (other than a minor party) which registers as a permitted participant is able, during the referendum period, to enter into regulated transactions with the individuals and bodies who are eligible to donate to the party during that period under Schedule 1 to the Act. Without this provision, registered political parties (that are not minor parties) would not be able to enter into regulated transactions with these individuals or bodies, which would be in contrast to other permitted participants (because Schedule 2 to the Act does enable them to do so). Paragraphs 12 and 13 prohibit the terms of such a transaction being varied so as to increase in value.