New company reporting requirements – directors' remuneration
New reporting requirements in The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 have been published by the Department for Business, Energy & Industrial Strategy.
This implements the Revised Shareholder Rights Directive (Articles 9a and 9b of European Directive 2017/828/EC1) which aims to further strengthen shareholder rights. It also includes the reporting of directors’ remuneration at traded companies.
Scope
The regulations apply to UK-registered quoted companies as defined in section 385 of the Companies Act, and to UK-registered traded companies as defined in section 360C of the Companies Act. They do not apply to companies whose shares are traded on the Alternative Investment Market (AIM).
Summary of the main changes
The UK regulations include amendments to the Remuneration Policy and Remuneration Report.
For a fuller guide to the changes please refer to the government’s explanatory guide and FAQs.
Remuneration policy:
- Certain additional detail to be provided on when shares indicatively awarded to directors may be granted or exercised, in particular by providing information on vesting periods, and on any holding or deferral periods;
- The policy must provide an indication of the duration of directors’ service contracts;
- The policy must set out the decision-making process through which it has been determined, and highlight key changes compared to the previous policy;
- The company must put the date and results of the shareholder vote on the new policy on its website as soon as reasonably practicable;
- If the company loses the shareholder vote on the policy, it must bring a revised policy to another vote within a year.
Remuneration report:
- The report must compare the annual change of each director’s pay to the annual change in average employee pay, over a rolling five year period;
- The report must show the split of fixed and variable pay for each director, as two additional columns to the existing ‘Single Figure’ table;
- The report must set out any changes made to share options granted or offered and the main conditions for the exercise of these rights including the exercise price and date, compared to the previous year;
- The report must be freely available on the company’s website for ten years;
- Remuneration reports must not include any sensitive personal data, revealing racial or ethnic origin, political opinions or religious beliefs.
Implementation date
The regulations were made on 22 May 2019 and apply to company reporting on financial years starting on or after 10 June 2019.