Directors’ remuneration: new regulations are in forcePrint publication
The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 have come into force. The regulations introduce new requirements in relation to a company’s remuneration policy and remuneration report.
The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 (2019 Regulations) came into force on 10 June 2019 and any remuneration policies and reports approved after this date will need to comply with these new regulations. The 2019 Regulations implement Article 9a (the right to vote on the remuneration policy) and Article 9b (information to be provided in and right to vote on the remuneration report) of the 2017 Shareholder Rights Directive to the extent that were not previously given effect under UK law. Implementation takes effect by way of amendments to the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410).
The 2019 Regulations widen the scope of the existing framework for directors’ remuneration reporting to include unquoted traded companies (which means the small number of UK companies with shares traded on a UK regulated market but not on the Official List and so cover, for example, Special Fund Segment and High Growth Segment companies). They also require for the first time that the remuneration of the CEO and any Deputy CEO is reported even if they are not statutory directors sitting on the board of the company. Other key changes are listed below.
Directors’ remuneration policy
Under the 2019 Regulations remuneration policies must:
- provide details on vesting and holding periods of share-based remuneration;
- give an indication of the duration of a director’s service agreement; and
- set out the decision-making process for the determination, review and implementation of the remuneration policy, explaining any significant changes from previous policies.
- the date and result of a shareholder vote on the remuneration policy must be included on the company’s website as soon as reasonably practicable and remain there for the life of the policy;
- where a company proposes a remuneration policy to shareholders and loses the vote, it must bring a new policy to a shareholder vote at the next accounts or general meeting; and
- where payments to directors for loss of office are inconsistent with the approved remuneration policy, shareholder approval will need to be obtained by way of an amendment to the remuneration policy rather than a vote on the specific payment.
Directors’ remuneration report
Under the 2019 Regulations remuneration reports must:
- be available free of charge on the company’s website for ten years;
- show the split of fixed and variable remuneration rewarded to each director in each year;
- specify changes to the exercise price of directors’ shares or share options;
- compare the annual change of director remuneration against annual change of employee remuneration; and
- compare the annual change of director remuneration against the company’s performance.
The Department for Business, Energy and Industrial Strategy (BEIS) has published a Q&A document to assist companies in understanding the reporting requirements introduced by the 2019 Regulations which summarises the new requirements. The document can be accessed here.