Whilst fundamentally the disclosure around directors’ remuneration has not changed with the exception of the requirement to disclose gains made on the exercise of shares options, the Act provides for broader disclosure in a number of areas.
Firstly, the definition of what constitutes a director has been expanded to include de facto directors. Section 222 of the Act outlines that a de facto director is a person who occupies the position of director of a company but who has not been formally appointed. The section does clarify however that a person shall not be a de facto director of a company by reason only of the fact that he or she gives advice in a professional capacity to the company or any of the directors of it.
Furthermore, a ‘director’ also includes any shadow director. A shadow director is defined in Section 221 of the Act and is a person in accordance with whose directions or instructions the directors of a company are accustomed to act.
The principal disclosures required in the financial statements in relation to directors’ remuneration for the current and preceding financial years are:
- aggregate amount of emoluments paid to or receivable by directors in respect of qualifying service
- aggregate amount of gains on the exercise of share options (effective only for financial years commencing on or after 1 June 2015);
- aggregate amount of emoluments paid to or receivable by directors in respect of qualifying services
- aggregate amount of money or value of other asset, including shares but excluding share options, paid or receivable under long-term incentive schemes in respect of qualifying services;
- aggregate amount of contributions paid, treated as paid, or payable to a retirement benefit scheme in respect of qualifying services identifying separately amounts relating to:
- aggregate amount of compensation paid or payable in respect of loss of office or other termination benefits.
(i) defined contribution schemes; and
(ii) defined benefit schemes
and in both cases showing the number of directors to whom retirement benefits are accruing under such schemes; and
The Act has separated out the disclosures above whereas previously some of these were amalgamated under the general term ‘emoluments’. In addition, the definition of emoluments has been expanded to include all benefits-in-kind regardless of whether they are charged to income tax or not. So overall, there are more disclosures, and the level of detail required to be disclosed has been expanded.
‘Qualifying services’, in relation to directors’ remuneration, continues to include his or her services as a director of the company and whilst director of the company, his or her services as a director of any of the company’s subsidiaries. Also there now is no longer a requirement to distinguish between emoluments in respect of services as a director and other emoluments. Qualifying services therefore now includes all emoluments for a director whether in their capacity as a director of the company or in connection with the management of the affairs of the company or its subsidiaries.
In terms of the actual disclosure itself, the note should include all emoluments with respect to services for the company, its subsidiaries and also any holding company in the group. Furthermore, disclosure of directors’ remuneration, as well as incorporating any payments to de facto directors and shadow directors (required under Section 306(6)), shall also include any amounts paid or payable to persons connected with a director (spouse, civil partner, parent, brother, sister or child, a trustee or a person in partnership). Note, this is only applicable where the financial year commences on or after 1 June 2015.