In the UK, the Enterprise and Regulatory Reform Act 2013 (the Act) has been passed into law, introducing a number of changes to the disclosure and directors’ remuneration.
The changes introduced in the Act have been brought into force through amendments to the relevant provisions of the UK Companies Act 2006, concerning the legal framework for remuneration of directors of quoted companies. It is widely expected that the changes will come into effect on 1 October 2013.
The key reforms in the Act include:
- Quoted companies must have a directors' remuneration policy which must be approved by shareholders by ordinary resolution at least every three years;
- All payments made to directors must be consistent with the policy or if not, must be approved by shareholders. This includes payments for loss of office. If directors approve payments which are inconsistent with the remuneration policy, those directors may be required, jointly and severally, to indemnify the company for any resulting loss. However, a court may relieve directors for liability if they can show that they acted honestly and reasonably.
- The directors’ remuneration report must include a separate, forward looking remuneration policy section.Whilst this development only affects UK companies, it will be of interest to Irish listed companies who follow the UK Corporate Governance Code.