In response to calls from UK businesses to take a more commercial approach to corporate hospitality so as not to put UK businesses at a disadvantage, the Guidance expressly confirms that the Government does not intend to prohibit UKDOCS/665518.13 reasonable and proportionate hospitality and promotional expenditure. It also provides further examples of legitimate conduct which should provide business with some reassurance. Prosecutorial discretion will be key, with relevant considerations including the lavishness of the hospitality in question, industry norms, the connection between the hospitality and any legitimate business activity, and concealment. The OECD has reportedly criticised the UK Government's more business-friendly approach to corporate hospitality in the Guidance.
By way of a short example, if a London-based private equity firm is to host the visit of a CEO of a Middle Eastern sovereign wealth fund, and buys tickets for the CEO to attend a football match, accompanied by representatives of the firm, where business is also discussed, this would beunlikely to present a problem. However, if the firm also pays for the CEO's family to visit London, finances associated activities and luxury accommodation, and bestows lavish gifts on the CEO and his family, this would give rise to material infringement risk. Commercial organisations should therefore establish controls for the objective and neutral scrutiny of corporate hospitality (whether by way of internal compliance persons, audit or accounting) so that what is provided in each individual case is pre-tested for reasonableness and overall compliance with the Act.
To read this article in full please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.