The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019
10 June 2019
These Regulations come into force on 10 June 2019 and implement a requirement in certain companies that the remuneration of the Chief Executive Officer and any Deputy Chief Executive Officer must be reported even if they are not a director on the board of the company.
Previously under UK law, only the remuneration of the directors on the board were required to be reported.
Geographical extent - UK wide
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy, Kelly Tolhurst said of the draft regulations that they bring in a number of very small but important enhancements to the UK’s well-established statutory framework for the reporting of directors’ remuneration at public companies.
In particular, by enabling greater transparency in how company share awards can be exercised by directors, and in how boardroom pay relates to the rest of the company, shareholders will have increased scope to access information on whether pay at the top is appropriate and aligned with the company’s long-term success. In doing so, the draft regulations will complement and build on the important new measures on executive pay that were approved by Parliament last year (CEO pay ratio reporting which came into force January 2019 with actual reporting expected to start in 2020).
Watch a short webcast, produced by the CIPP policy team which provides an overview of the CEO pay ratio reporting requirements.
The CIPP also run an online course aimed at payroll coordinators, payroll managers, HR managers and finance professionals who have responsibility for preparing CEO pay ratios figures and/or the accompanying narrative in the annual Directors’ Remuneration Report.
The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019
The Regulations implement in part Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement. The Directive amends Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies. These Regulations contain the implementation of article 9a (right to vote on a company’s remuneration policy) and article 9b (information to be provided in and right to vote on the remuneration report), which are inserted into the Original Directive.
The Original Directive applies to a company whose shares carry voting rights and are admitted to trading on a regulated market within the EEA. In the UK, the definition of “traded company” in section 360C of the Companies Act 2006 (c. 46) (“the Act”) covers this type of company.
The Act and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (S.I. 2008/410) (“the 2008 Regulations”) already provide a legal framework in the UK for approval of and voting on directors’ remuneration, and this legislation currently applies to quoted companies (as defined in section 385 of the Act) which includes traded companies unless they are unquoted companies (also defined in section 385). This framework is amended by these Regulations to implement the Directive, including bringing unquoted traded companies within scope of the existing legal framework.