Commentary Schedule 3: Campaign rules Part 6: Control of loans and credit
240.The rules set out in Part 6 of schedule 3 provide for the control of ‘regulated transactions’, i.e. loan or credit transactions entered into by permitted participants who are not registered parties. Paragraph 46 sets out the scope of operation of this Part of the schedule.
241.Paragraph 47 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 or credit to meet referendum expenses. An agreement of this type may also be supplemented by a ‘connected transaction’, where a third party backs up the permitted participant by offering security to the lender. In this case, the connected transaction is also considered to be a regulated transaction. Agreements where the value is less than £500, and payments which are already covered in statements of relevant donations to the Electoral Commission under paragraph 40, do not count as regulated transactions.
242.Paragraph 48 sets out how a regulated transaction should be valued. Where the transaction is a loan agreement, the value is the full amount of the money to be lent. Where the transaction is a credit agreement, the value is the maximum credit limit. Both of these exclude any interest provisions in the agreement. Where the transaction is arranged on the basis of a security, the value is the liability under the security.
243.Paragraph 49 prohibits permitted participants from entering into regulated transactions with anyone who is not a permissible donor as defined in paragraph 1(2) of schedule 3.
244.Under paragraph 50, any transaction between a permitted participant and an impermissible donor 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 a sheriff to make an order to return the money or discharge any security, with the effect that both parties return to the positions they would have been in if the transaction had never existed.
245.Paragraph 51 provides that where a regulated transaction is void due to impermissibility of the donor as set out under paragraph 50, any security for a loan of money as described in paragraph 47(3)(b) is also void. If the lender is unable to recover the full amount owed by the permitted participant, the lender may recover such sums from the third party.
246.Paragraph 52 provides that any attempt by an authorised participant to transfer their interest in a regulated transaction to an unauthorised participant is not valid.
247.Paragraph 53 provides for the offences related to regulated transactions, including:
	it is an offence for a permitted participant to enter into a regulated transaction in the knowledge (or where it ought reasonably to have been known) that the other party is not an authorised participant.
	where a permitted participant has entered into a transaction with an unauthorised participant, but could not reasonably have been expected to know, it is still an offence not to take reasonable steps to repay the money after the impermissibility of the other party becomes apparent.
	it is an offence to benefit from or be in line to benefit from a connected transaction which involves an unauthorised participant where their impermissibility was known or could reasonably have been expected to have been known. It is also an offence, where the impermissibility was not known, to fail to take all reasonable steps to repay the benefits once the impermissibility becomes apparent.
	it is an offence to knowingly enter into, or knowingly facilitate, any arrangement which is likely to result in a permitted participant being involved in a regulated transaction with an unauthorised participant.
248.The offences include situations where the other party was originally an authorised participant but later ceased to be one. It is a defence for a person who is the responsible person for the permitted participant to show that they took all reasonable steps to prevent the permitted participant entering into the transaction.
249.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 an authorised participant, or to fail to repay money received under a loan or other regulated transaction from a person who has ceased to be an authorised participant after becoming aware the person has so ceased. It is a defence for a person to show that they took all reasonable steps, as soon as practicable, to repay the loan or regulated transaction.
250.Paragraph 54 details the penalties associated with the offences listed in paragraph 53, which, depending on the offence, are either a fine or imprisonment for a term of up to 12 months (or both).
251.Paragraph 55 sets out the requirement for permitted participants to include regulated transactions in the statements prepared for the Electoral Commission under paragraph 22. The transaction need only be included in the return where the value exceeds £7,500, or where the aggregate value of the transaction and any other relevant benefits (being donations or other regulated transactions) exceeds £7,500.
252.Paragraph 56 sets out the information that must be recorded in the statement prepared under paragraph 22 in relation to each recordable transaction to which an authorised participant was a party.
253.Paragraphs 57 and 58 require the statement to include details of any authorised or unauthorised participants, and it must also include details of the transaction in line with schedule 6A to the Political Parties, Elections and Referendums Act 2000 (which deals with transaction reports prepared by registered political parties), subject to the modifications made by paragraph 58(2) and any other necessary modifications.
254.Under paragraph 59, where there is any change to the agreement, such as different participants, 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.
255.Paragraph 60 requires that the statement also includes the total value of regulated transactions that are not recordable.
256.Paragraph 61 requires that reports must be prepared by the responsible person in relation to permitted participants detailing regulated transactions which have a value exceeding £7,500 that are to be used for the purpose of meeting referendum expenses incurred by the permitted participant during the referendum period. These transaction reports must be prepared in respect of the same periods as required in paragraph 43 for donations. If no such transactions were entered into, the report must state this. Failure to make a report and failure to comply with the requirements of paragraph 61 are offences.
257.Paragraph 62 requires each of these transaction reports to be accompanied by a declaration, signed by the responsible person, confirming that the report is complete. Making a false declaration, or a failure to make one by a responsible person, is also an offence.
258.Paragraph 63 requires the Electoral Commission to make pre-poll transaction reports publicly available as soon as practicable, and to keep a copy available for public inspection for a period of 2 years, after which they are to be destroyed or returned to the permitted participant.
259.Paragraph 64 deals with a situation where a sheriff, on the application of the Commission, is satisfied that a failure to comply with any requirement under this part of the schedule was caused by a person attempting to conceal the existence of, or true value of, the transaction. In this case, the sheriff may make an order which will return the parties to the same position as if the transaction had never been made.
260.Paragraph 65 makes provision in relation to the court proceedings before the sheriff in relation to reversing a regulated transaction or disclosure of information relating to a transaction under paragraphs 50 or 64. It sets out that they will take place as civil proceedings and that orders of the sheriff are appealable to the Court of Session. Rules of court may make provision with respect to court applications or appeals.
261.Paragraph 66 contains definitions of words and phrases used in this schedule.