Company and Commercial Law – a look at Directors’ remuneration in 2014

Further amendments to the Companies Act 2006 mean that director’s remuneration policies are set to change in 2014.

Almost eight years on and the Companies Act 2006 has been amended again in relation to directors’ remuneration.

New amendments, which actually came into force in October 2013, means that companies with financial years ending on or after 30 September 2013 are required to comply with a new reporting and voting regime in relation to directors’ remuneration.

As the 2014 reporting season gets underway, Company and Commercial Solicitor Agata Rumbelow looks at how companies are responding to the new regime.

‘What’s Market’ conducted a review of the 18 FTSE 350 premium equity commercial companies that have financial years ending on or after 30 September 2013 and have published their notice of AGM. They found that:

• All 18 companies have or are proposing a resolution to approve the directors’ remuneration policy at their 2014 AGM.
• Of those 18 companies, 14 companies state that the directors’ remuneration policy will take effect from the date of the AGM.
• Only four companies stated that the directors’ remuneration policy will take effect from the beginning of the next financial year.
• Four companies have included a specific reference to the start date of the policy in the text of the resolution approving the directors’ remuneration policy as well as in the directors’ remuneration report.
• Two companies refer to the GC100 and Investor Group’s guidance on directors’ remuneration reporting published in September 2013 in their directors’ remuneration report.
• Following publication of the directors’ remuneration reports, four companies have made further announcements clarifying certain aspects of their directors’ remuneration policy following discussions with shareholders. For example, one company has clarified that in the case of a new executive director, if the service contract is terminated by the company and payment in lieu of notice is made, the remuneration committee would seek to limit any payment to 12 months’ base salary, pension and other benefits.
• Seven companies have held their AGM already this year, all of which obtained shareholder approval for their directors’ remuneration policies. Two companies received a substantial vote (between 10% and 49.9%) against both the directors’ remuneration report and the directors’ remuneration policy and one company received a substantial vote against the directors’ remuneration policy.

One company that has a 30 September year-end and has published its notice of AGM, is an Irish incorporated company and therefore is not subject to the new directors’ remuneration reporting regime. However, this company is proposing a resolution at its 2014 AGM to approve the directors’ remuneration policy, although the vote is an advisory vote rather than a binding vote as required by the Companies Act 2006.

Source: What’s Market, AGMs: FTSE 350: 2014

The Commercial Law Department at Pinney Talfourd Solicitors has a wealth of experience in corporate law including Directors’ duties. Agata Rumbelow specialises in all aspects of corporate law with a particular expertise in Mergers and Acquisitions. She has acted for clients ranging from small private owner managed businesses through to large AIM listed companies. Contact Agata to discuss your company and it’s needs.

This article was written by Agata Rumbelow, a Solicitor in our Company and Commercial Team. This article is only intended to provide a general summary and does not constitute legal advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at January 2014.