Labour party chiefs face the very real prospect of been declared bankrupt next month, if they cannot plug a £4 million gap in their finances.
Auditors are due to sign off the party’s accounts soon after the end of May, but there are fears that they will refuse to do so and instead declare the party insolvent.
The vast majority of the £21 million debt, largely from the 2005 election campaign has been renegotiated.
But officials have found a 4 million pound in the party balance sheet that must be filled in order to satisfy the auditors, either by cash in the bank or certifiable promissory notes.
Recently city financier David Pitt-Watson refusing to take up the post of Labour general secretary because of the size of the debt and fear of incurring personal liability. The general secretary that never was has cost the party £50,000 in advertising and consultancy fees, future advertising for the post will be restricted to the internet to keep costs down.
Because the general secretary has overall legal responsibility for finances, the prime minister is considering turning the party into a private limited company to protect officers and national executive members from individual liability if the party is declared insolvent.
May 13th, 2008 at 1:43 pm
Here via liberal conspiracy
“Because the general secretary has overall legal responsibility for finances, the prime minister is considering turning the party into a private limited company to protect officers and national executive members from individual liability if the party is declared insolvent.”
But note the rules relating to wrongful trading - s 214 of the INsolvency Act 1986 provides that when directors trade knowing the company is insolvent and likely to go into insolvent liquidation but do not minimise the loss to creditors then they may be found personally liable under company law. These rules also apply to shadow directors (Ie those that are really controlling the company and on whose instructions the company is acting (the leader?)) Further - they risk possible aciton under the Company Dircetors Disqualification Act 1986 - and banned from being a director for 2 - 15 years.
May 13th, 2008 at 2:27 pm
Thanks for that scott, the fact that even if the do turn the Labour Party into a PLC, but would still be liabl if they became insolvent will be causing an even bigger headache at Labour HQ. Although most of them are lawyers and heve a tone of lawyers in the wings to protect them, so I bet they will find a loophole.