The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 were published on 29 May 2019. The regulations amend the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 by implementing Articles 9a (Right to vote on the remuneration policy) and 9b (Information to be provided in and right to vote on the remuneration report) of the Shareholder Rights Directive, as inserted by the Shareholders Rights Directive II.

The regulations apply to quoted companies (ie companies on the Official List) and to unquoted traded companies (ie companies traded on a regulated market that are not quoted companies.) They do not apply to AIM companies.

The new requirements are as follows:

Directors’ remuneration policy

  • If a company loses a shareholder vote on a proposed remuneration policy, it must put a new remuneration policy to a shareholder vote at the next accounts meeting or other general meeting.
  • The remuneration policy must provide details on vesting periods, and any deferral and holding periods in respect of share-based remuneration to directors.
  • The remuneration policy must specify 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.
  • The date and results of the shareholder vote on the remuneration policy must be posted on the company’s website as soon as reasonably practicable and remain there for the life of the policy.

Directors’ remuneration report

  • The remuneration report must be available free of charge on the company’s website for ten years.
  • The remuneration report must include the split of fixed and variable remuneration awarded to each director each year.
  • The remuneration report must specify any changes to the exercise price and date for the exercise of shares or share options by directors.
  • The remuneration report must 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 report must include the remuneration of the CEO and deputy CEO even if they are not directors of the company.

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.

The regulations will come into force on 10 June 2019.