JD Wetherspoon have been accused of breaching the Companies Act after failing to seek shareholder approval for spending on almost 2m pro-leave beer mats before the 2016 EU referendum.
The pub chain spent £94,856 during the referendum campaign, comprising £18,000 on 1.5m “Brexit beer mats”, £8,400 on 200,000 beer mats, and £68,186 on another 200,000 beer mats, 5,000 posters and 500,000 booklets, Electoral Commission records show.
Legal experts said shareholder approval was necessary because the spending constituted political expenditure under the 2006 legislation.
Wetherspoon’s chairman and founder, Tim Martin, is one of the business world’s most vocal Brexit supporters and has used his pub chain as a platform for his views.
Martin owns 32% of Wetherspoons. Most of the remaining shares are held by pension funds and managed by City investors. The Guardian understands some large investors have objected to Martin using the pub chain to promote his views.
Wetherspoon distributed the Brexit beer mats in more than 900 pubs during the referendum campaign featuring the message “‘vote ‘leave’ – take back control”. On one set of mats, Martin criticised Christine Lagarde, the then head of the International Monetary Fund. On another, he took aim at George Osborne, the then chancellor.
The company also published an edition of its Wetherspoon News magazine featuring a two-page pro-Brexit editorial by Martin, nine pages of Eurosceptic articles and just four pages of pro-EU articles.
The Companies Act 2006 says political expenditure includes activities “capable of being reasonably regarded as intended to influence voters in relation to any national or regional referendum”.
The legislation says political spending must be approved in advance by shareholders, but Wetherspoon did not pass such a resolution before the referendum. Companies are also meant to declare annual political spending above £2,000 in their annual report, which Wetherspoon did not do.
Martin said his understanding was that the act did not require Wetherspoon’s spending to be approved in a shareholder resolution. “The Electoral Commission does require the expenditure to be reported and we complied with this requirement,” he said.
But Bobby Reddy, a former City law firm partner who lectures on corporate law at the University of Cambridge, said such materials would be covered by the definition of political expenditure.
“Material that specifically says that individuals should vote leave would seem to come clearly under the heading of activities intended to influence voters in relation to a national referendum,” Reddy said. “It would therefore come under the heading of political expenditure under the Companies Act.”
Reddy declined to comment specifically on the Brexit edition of Wetherspoon News, but he said: “On balance, I think a reasonable person would regard a magazine setting out various opposing opinions on the referendum to be for informational purposes and not intended to influence how someone should vote. It is not black and white though.”
Dominic Chambers QC, a barrister at Maitland Chambers, agreed that the spending on the beer mats appeared to meet the definition of political expenditure.
“The use of these beer mats in Wetherspoon pubs constitutes the publication or dissemination of advertising or other promotional or publicity material, and the slogan on the beer mats – ‘vote leave – take back control’ – is capable of being reasonably regarded as intended to affect public support for the official Vote Leave campaign in the 2016 referendum … because that was the campaign’s slogan,” he said.
Wetherspoon has continued to promote Brexit since the referendum, including in its financial reporting. The company’s recent annual results featured more than 2,000 words of Martin’s views on the EU and supporting materials. Presenting the results he said government predictions of turmoil after a no-deal Brexit were “bollocks” and that shareholders had not asked him to tone down his views.
But at a meeting between Martin and City investors on 3 April some large shareholders are understood to have asked him to stop using company reports to promote his views. He is said to have responded that he did not agree with the objectors.
Martin did not confirm or deny what went on at the meeting but said he could not recall any shareholder letter asking him to stop campaigning and that he had received “almost zero” customer complaints.
“In a democracy I think people genuinely believe that you are at liberty (and the country gains) from view being expressed,” he said.
Sarah Wilson, the chief executive of corporate governance adviser Minerva, said the spending raised questions about governance at Wetherspoon, which holds its annual general meeting next month.
“He [Martin] is a major shareholder, but he’s not the only shareholder,” she said. “Others may think it’s inappropriate for him to use the company for expressing his views.”
PIRC, another governance adviser, said: “As a matter of principle, PIRC regards the use by listed companies of shareowner funds to influence the outcome of referenda as unacceptable.”