This checklist sets out the main requirements of the Directors’ Remuneration Report Regulations (the Regulations).
The 2002 Regulations are currently contained in Schedule 7A to the Companies Act 1985. This Schedule is due to be repealed with effect from April 2008 when the relevant provisions of the Companies Act 2006 take effect. The provisions of Schedule 7A will be re-enacted in Regulation 11 and Schedule 8 of the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008. The new regulations will generally apply for financial years beginning on or after 6 April 2008. There is only one material change in the new Regulations.
The Regulations require quoted companies to prepare a directors’ remuneration report (the Report) that complies with the Regulations, and to put the Report to a shareholder vote.
The checklist is in four sections, with supplementary schedules:
- Section I establishes the framework of the Regulations by setting out directors’ obligations in relation to their company’s Report, and penalties for non-compliance;
- Section II summarises the ‘non-audit’ part of the Report – covering policy and ‘softer’ items that must be included in the Report, but are generally not capable of audit;
- Section III covers those matters that are subject to audit, forming the greater part of the Report;
- Section IV provides some definitions of key terms;
- Schedule 1 sets out best practice recommendations on remuneration policy; and
- Schedule 2 sets out best practice on service contract policy.
The checklist sets out some practical comments on some of the requirements of the Regulations. In addition, it includes cross references in the text and separate schedules setting out related guidance on best practice, including the relevant provisions of the Combined Code on Corporate Governance (the Combined Code), the joint statement by the Association of British Insurers and the National Association of Pension Funds on best practice on executive contracts and severance (the ABI/NAPF Joint Statement), the Association of British Insurers guidelines on executive remuneration (the ABI Guidelines) and the National Association of Pension Funds 2007 corporate governance policy (the NAPF Guidelines).
The checklist can also be used when preparing or reviewing Reports by ticking the penultimate column in the checklist to ensure each requirement is complied with.
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