Following the consultation earlier this year, the new Regulations on disclosure of directors' remuneration came into force this month.
The Directors' Remuneration Report Regulations 2002 (which have amended the Companies Act 1985) require all UK companies which are listed in the UK or any other EU state, or on the New York Stock Exchange or NASDAQ, to:
include a detailed report on directors' remuneration in the annual report; and
put a resolution on the report to shareholders at each annual general meeting.
Copies of the Regulations will be available from the HMSO website - www.hmso.gov.uk
When will the new Regulations take effect?
The Regulations apply to financial years ending on or after 31 December 2002. This means that a company whose current financial year ends on or after that date will have to produce a remuneration report satisfying the new requirements as part of its next annual report and accounts and put the necessary resolution to shareholders at the next AGM. Directors who sit on remuneration committees and company secretaries will need to familiarise themselves with the detail of the Regulations now and think about how information on remuneration will need to be collated and presented in order to satisfy the new disclosure requirements.
What are the changes?
The Listing Rules already require a lot of detail about directors' remuneration to be included in an annual remuneration report. What the Regulations do is put this on a new statutory footing, add new procedures that need to be followed, add to the level of disclosure particularly in relation to policy and add a requirement to put the report to the vote.
The requirement for listed companies to prepare a directors' remuneration report is now a statutory requirement under the new Section 234B of the Companies Act, rather than only a Listing Rules requirement. Failure by a company to comply with this requirement is a criminal offence making all directors liable to a fine.
The report must be approved by the board and signed on its behalf by a director or the company secretary. A signed copy must be delivered to the Registrar of Companies. It will be an offence to put the report to a shareholder meeting, or to circulate, publish or file the report, if it has not been properly signed, and every copy of it which is circulated must state the name of the person who signed it.
A copy of the report must be sent to every member of the company, every holder of the company's debentures and every person who is entitled to receive notice of general meetings. For those listed companies that send out a summary financial statement, the regulations relating to summary financial statements have been amended to set out those elements of the remuneration report which are to be included in the summary financial statement.
Listed companies are now required to put the directors' remuneration...