There will be some changes to the rules on directors' remuneration reporting in the Companies Act 2006 to reflect the requirements of the EU Shareholder Rights Directive II which EU member states must implement by 10 June 2019. The changes will affect companies with shares admitted to trading on a UK or other EEA regulated market.
The EU Shareholder Rights Directive II introduces provisions on the reporting of directors' remuneration. These are intended to strengthen the governance and performance of traded companies across the EU.
The UK, through the Companies Act 2006 (the Act) and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the Regulations), already has a legal framework for reporting on directors' remuneration and providing for a members' vote on the remuneration report and the remuneration policy. Most of the requirements on directors' remuneration reporting contained in the Directive are therefore already part of UK law. However, a number of changes will be necessary to reflect the detailed requirements of the Directive.
- Scope: The scope of the existing framework for directors' remuneration reporting will be widened to apply to "traded companies", i.e. companies whose securities are admitted to trading on a regulated market in the UK or another EEA state. The UK's domestic regime has applied to "quoted companies" i.e. companies whose securities are officially listed in the UK or another EEA state or whose securities are admitted to dealing on the New York Stock Exchange or Nasdaq.
- Directors' remuneration policy: There are changes to the information that must be included in a remuneration policy, to the requirements when a company loses a shareholder vote on a proposed policy and to the publication of shareholder voting information.
- Directors' remuneration report: The report will have to include the split of fixed and variable remuneration awarded to each director, 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 that of the company's employees and of the company's performance over a five-year period. It will also have to be available free of charge on the company's website for 10 years.
- Directors' remuneration payments: Remuneration or loss of office payments to directors that are not consistent with the approved directors' remuneration policy may only be made if an amendment to the policy authorising the company to make the payment has been approved by shareholders.