Out-Law / Your Daily Need-To-Know

Remuneration report changes due to take effect earlier than anticipated

18 Mar 2013, 4:20 pm

Changes to the information that must be contained in companies' remuneration reports will take effect earlier than anticipated, the Government has indicated.

According to an FAQ document, circulated the day after an amended set of regulations was published for consultation, the new regime will apply to companies with financial years beginning on 1 October 2013. The Government had originally proposed that the changes would apply to companies with financial years ending after October 2013.

Share plans expert Matthew Findley of Pinsent Masons, the law firm behind Out-Law.com, said that although the change to the commencement provisions would not affect many companies, for those who were affected the change was "significant".

"It was previously the case that if your year end was 30 September 2013, you would not have been expecting to have to comply with the new rules until your AGM in late 2014/early2015," he said. "The change means that you must comply a year earlier."

"While the majority of companies will have invested considerable time preparing for the new rules, having to comply a year earlier - and being among the first companies under the microscope – will be unsettling for those that are affected," he said.

The FAQ document states that companies will need to produce a directors' remuneration report in the new format prescribed by the regulations for the AGM held in the first financial year beginning on or after 1 October 2013. At this AGM, the report must be put to shareholders for approval. All companies must have successfully sought shareholder approval for their remuneration policy by the start of the second financial year to begin after the reforms come into force.

Once the changes take effect, remuneration reports will be split into two parts: a forward-looking pay policy report, which will be subject to a binding shareholder vote, and a report on how that policy was implemented over the previous year. The implementation report must include details of actual payments made by the company, set out as a single figure for the total pay directors received in the year.

The Government is currently consulting on an amended set of regulations which will give effect to the changes. The consultation is open until 25 March 2013.