Freshfields Bruckhaus Deringer llp Directors’ remuneration –
proposed changes to Listing Rules
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
The FCA proposes to
between the Listing
Rules and the new