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Director's remuneration


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This briefing will consider the new requirements under the UKLA's Listing Rules for UK incorporated premium listed companies

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Director's remuneration

  1. 1. Freshfields Bruckhaus Deringer llp Directors’ remuneration – proposed changes to Listing Rules September 2013 1 Requirements under the UKLA’s Listing Rules for UK incorporated premium listed companies The Financial Conduct Authority (FCA) has issued a consultation paper on changes to its Listing Rules to remove an unnecessary overlap between the disclosure requirements for directors’ pay under those Rules and the disclosure obligations that will soon apply under the new Directors’ Remuneration Report Regulations coming into effect later this year. The new DRR Regulations will apply to UK incorporated and listed companies for financial years beginning on or after 1 October 2013 and will change the disclosure of directors’ pay in future annual reports significantly. Assuming the changes to the Listing Rules go through, the only disclosure obligations that companies with financial years ending after 31 December 2013 will need to comply with will be those in the DRR Regulations. However, premium listed companies with a year-end falling in the period 30 September 2013 to 31 December 2013 will have to comply with both sets of requirements from 1 October 2013 to 31 December 2013. The FCA has decided not to change the disclosure requirements for non-UK incorporated companies with a premium listing. These companies will be outside the scope of the new DRR regime and the Listing Rules will not impose similar disclosure obligations on them. Accordingly, overseas incorporated companies will strictly be required only to disclose details of the unexpired term of the service contract of a director who is proposed for (re-)election at the AGM or, in the case of any director proposed for (re-)election who does not have a service contract, a statement to that effect (LR9.8.8R(9)). These companies may of course decide that they wish, on a voluntary basis, to follow the new DRR disclosure regime which other UK listed companies will now have to observe. The proposed amendments will be to Chapter 9 of the Listing Rules (Continuing Obligations) and will apply from 1 January 2014. Most of LR9.8.8R will be removed with the exception of LR9.8.8R(9) mentioned above. The other proposed changes will remove LR9.8.11R (the requirement for auditors to review specific disclosures) and LR9.8.12R (the requirement that auditors provide a statement of non-compliance if relevant) since the DRR regulations contain their own audit requirements. The consultation does not address the other area of potentially significant overlap between the new DRR regulations and the Listing Rules – namely the obligation under LR9.4.1 to obtain shareholder approval for employees’ share schemes that use new issue or treasury shares and long-term incentive plans (LTIP) in which directors participate. Traditionally, the notes to the resolution seeking shareholder approval for any new share plan or LTIP have included much of the same information as will now be set out in the remuneration policy. This is particularly acute for performance conditions where companies typically spell out the detailed performance conditions and targets that will apply in the first year of grant but give the remuneration committee the power to set different (but no less demanding) performance Directors’ remuneration – proposed changes to Listing Rules The FCA proposes to remove an unnecessary overlap between the Listing Rules and the new Directors' Remuneration Report Regulations.
  2. 2. Freshfields Bruckhaus Deringer llp is a limited liability partnership registered in England and Wales with registered number OC334789. It is authorised and regulated by the Solicitors Regulation Authority. For regulatory information please refer to Any reference to a partner means a member, or a consultant or employee with equivalent standing and qualifications, of Freshfields Bruckhaus Deringer llp or any of its affiliated firms or entities. This material is for general information only and is not intended to provide legal advice. © Freshfields Bruckhaus Deringer llp, September 2013, 36719 conditions or targets in subsequent years. Now any change in those conditions will be a matter for shareholder approval through the remuneration policy and so does not need policing through the share plan/LTIP vote. It would have been good to see the FCA acknowledge this overlap and give companies a clear steer that it will be acceptable to deal with policy matters through the remuneration policy vote only and that the description of the principal terms of the share plan or LTIP description need only cover mechanical matters. Absent that, or a similar steer from institutional investors, companies are likely to feel compelled to maintain the status quo and so duplicate unnecessarily the information provided to shareholders. The FCA has requested responses by 9 October 2013. The consultation does not address the other area of potentially significant overlap between the new DRR regulations and the Listing Rules – namely the obligation under LR9.4.1. Jocelyn Mitchell Simon Evans Martin MacLeod T +44 20 7832 7191 E jocelyn.mitchell@ T +44 20 7832 7358 E simon.evans@ T +44 20 7427 3781 E martin.macleod@ For more information please contact: