The Enterprise and Regulatory Reform Bill 2013 (ERRA) will increase shareholders’ rights in relation to directors’ remuneration and amend the provisions of the Company Act 2006 which relate to disclosure of director’s remuneration for quoted companies. The following key changes are set to be introduced on 1st October 2013.
- The directors’ remuneration report must include provision for a forward looking policy part, which must be approved by a binding shareholder vote at least every three years;
- Policy part must be approved before the expiry of the three year period if the company wishes to change the policy or the shareholders did not approve the advisory vote on a non-policy provision of the directors’ remuneration report at the company’s previous AGM;
- The company is prohibited from making a remuneration payment or loss of office payment to a current, former or future director, unless this is permitted by the most recently approved remuneration policy;
- Any payment which is inconsistent with an approved policy will be held by the recipient in trust and can be recovered by way of a derivative action. Directors who authorise payment in these circumstances would be personally liable for any loss to the company unless they can demonstrate that they acted honestly and reasonably.