The Lib Dems said they had acted in good faith

The watchdog's probe looked at whether the donation was "permissible", as electoral law requires donating firms to be registered and trading in the UK.

5th Avenue Partners was based in London but owned by a Swiss-based firm headed by Scottish financier Michael Brown.

The firm said it had relied on the Lib Dems to ensure its donation was proper.

The Liberal Democrats said they had acted in good faith with all donations.

The party's chief executive, Lord Rennard, welcomed the statement from the Electoral Commission.

The commission found it was "reasonable" for the party to regard the donation as having been permissible.

But it added the Liberal Democrats should have made better checks.

The Electoral Commission said it will now be having further discussions with all political parties to ensure adequate processes are in place for checking corporate donations.