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Government publishes draft legislation amending directors' remuneration requirements

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15 Apr 2019

The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 (the draft Regulations) have been laid before Parliament.

The draft Regulations, which will come into force on 10 June 2019, partially implement the EU Shareholders Rights Directive II in the UK. They amend the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) to extend the scope of remuneration reporting to unquoted traded companies and introduce new requirements in respect of the directors' remuneration policy and the directors' remuneration report.

The new requirements for the directors' remuneration policy are as follows:

  • where a company loses a shareholder vote on a proposed remuneration policy, it must bring a new remuneration policy to a shareholder vote at the next accounts meeting or other general meeting;
  • in respect of share-based remuneration to directors, the remuneration policy must provide details on vesting periods, and any deferral and holding periods;
  • the remuneration policy must give an indication of the duration of directors’ service contacts;
  • the remuneration policy must set out the decision-making process for its determination, review and implementation, and must explain all significant changes compared to the previous policy; and
  • the date and results of the shareholder vote on the remuneration policy must be put on the company’s website as soon as reasonably practicable and remain there for the life of the policy.

Under the draft Regulations the remuneration report must:

  • be made available free of charge on the company website for ten years;
  • show the split of fixed and variable remuneration awarded to each director each year;
  • specify any changes to the exercise price and date for the exercise of shares or share options by directors; and
  • compare the annual change in directors’ remuneration to the annual change in pay of the company’s employees and of the company’s performance (measured in terms of total shareholder return) over a five year rolling period.

 The draft Regulations are available here.

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