Q&As

Does a UK subsidiary of an overseas parent have to provide CEO pay ratio information in its annual report?

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Published on: 10 January 2019
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This Q&A refers to the requirement under the Companies (Miscellaneous Reporting) Regulations 2018 (2018 Regulations), SI 2018/860, reg 17 for certain companies with accounting periods beginning on or after 1 January 2019 to include in the directors’ remuneration report pay ratio information (and other supporting information) comparing the total remuneration of the CEO to the median (50th), 25th and 75th percentile full-time equivalent remuneration of the company’s UK employees.

The requirement to provide pay ratio information applies to

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Jurisdiction(s):
United Kingdom
Key definition:
Subsidiary definition
What does Subsidiary mean?

There are two suggested definitions for the term 'subsidiary', as commonly used in agreements. CA 2006, s 1159 provides that a company is a holding company of another company (its subsidiary) if it satisfies one of three tests, two of which require it to be a member of the other company (as well as to possess certain rights, which go to its voting powers). Membership of a company is a question of fact and the court has found that if a company (company A) has transferred shares in another company (company B) to a lender in connection with the taking of security and the name of that lender or the lender’s nominee has been entered in the register of members, then company A is not a member of company B in respect of those shares: see Enviroco Ltd v Farstad Supply A/S.

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