The FCA has proposed changes to the UKLA's listing rules to eliminate overlap with the new directors' remuneration report regulations, effective for financial years beginning on or after October 1, 2013. Premium listed companies with relevant year-ends must comply with both the existing and new requirements until December 31, 2013. The consultation seeks feedback by October 9, 2013, but does not address overlaps related to shareholder approval for employees’ share schemes and long-term incentive plans.

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. freshfields.com
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© 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@
freshfields.com
T +44 20 7832 7358
E simon.evans@
freshfields.com
T +44 20 7427 3781
E martin.macleod@
freshfields.com
For more information please contact: