The draft Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 (Draft Regulations) have been published as part of the drive to encourage long-term shareholder engagement and to strengthen the governance and performance of traded companies. The Draft Regulations implement the following articles of the Shareholder Rights Directive II (2017/36/EU), which must be transposed into national law by 10 June 2019:

  • Article 9a – the right to vote on a company’s remuneration policy; and
  • Article 9b – the information to be provided in, and right to vote on, the remuneration report.

Most of the directors’ remuneration reporting requirements inserted by the Shareholder Rights Directive II already apply in UK law and the Draft Regulations will implement most of the requirements that do not currently apply.

Proposed Amendments to Directors’ Remuneration


The Draft Regulations include amendments to widen the scope of the existing framework for directors’ remuneration reporting to include unquoted traded companies.  In addition, the Draft Regulations require that remuneration of the Chief Executive Officer and any Deputy Chief Executive Officer must be reported even if they are not a director on the board of the company. Under current UK law, only the remuneration of the directors on the board is required to form part of the company’s reporting.

Directors’ remuneration policy

Under the Draft Regulations the following requirements will apply from 10 June 2019, and remuneration policies must:

  • provide details on vesting periods and any deferral or holding period of share-based remuneration to directors;
  • give an indication of the duration of directors’ service contracts; and
  • set out the decision-making process for the determination, review and implementation of the policy, and explain all significant changes compared against the previous policy.

In addition, the date and result of a shareholder vote on the remuneration policy must be included on the company’s website as soon as reasonably practicable and must remain there for the life of the policy. Where a company proposes a remuneration policy to shareholders and loses the vote, it must bring a new remuneration policy to a shareholder vote at the next accounts or general meeting.

Directors’ remuneration report

Under the Draft Regulations, from 10 June 2019, remuneration reports must:

  • be available free of charge on the company’s website for ten years;
  • show the split of fixed and variable remuneration rewarded to each director each year;
  • specify changes to the exercise price of directors’ shares or share options; and
  • compare the annual change of director remuneration against the annual change of employee remuneration, as well as against the company’s performance.

Loss of office payments

Current UK company law sets out that where payments to directors or loss of office payments are inconsistent with the approved remuneration policy, shareholder approval for the specific payment must be obtained.

This is to be amended under the Draft Regulations, where shareholder approval for the payment will instead have to be obtained by way of an amendment to the remuneration policy.

Other Shareholder Rights Directive II provisions

The Shareholder Rights Directive II introduces a number of additional provisions, including transparency requirements covering the work of proxy advisers (research services) and enhanced requirements for the transparency and approval of related party transactions by traded companies. The Explanatory Memorandum to the Draft Regulations makes clear that these additional provisions will be implemented by the Financial Conduct Authority, HM’s Treasury, the Department of Work and Pensions and the Department for Business, Energy and Industrial Strategy.

Next steps

The Draft Regulations are currently being considered by the House of Lords Select Committee. If approved in their current form, the Draft Regulations will come into force on 10 June 2019, and remuneration policies that are approved on or after 10 June 2019 will be subject to these additional requirements.