Executive directors' shareholding and post-employment shareholding requirements for UK listed companies
Produced in partnership with Sonia Gilbert of Clifford Chance
Executive directors' shareholding and post-employment shareholding requirements for UK listed companies

The following Share Incentives practice note produced in partnership with Sonia Gilbert of Clifford Chance provides comprehensive and up to date legal information covering:

  • Executive directors' shareholding and post-employment shareholding requirements for UK listed companies
  • Executive directors’ shareholding requirements
  • Shareholding requirement
  • Post-Employment Shareholding requirement
  • Enforcing the requirements?
  • What happens if a company does not comply with the shareholding requirements?

Executive directors’ shareholding requirements

Aligning executive directors' pay with a company's long-term strategy and the interests of its shareholders remains a hot topic for UK listed companies. Having a minimum shareholding requirement further strengthened by a post-employment shareholding policy has now become best practice among listed companies.

The principles governing a UK listed company's shareholding requirements are set out in the FRC's Corporate Governance Code (the Code) and in supporting institutional investor guidelines. The primary institutional investor guidelines for these purposes are the Principles of Remuneration published by the Investment Association (IA) (typically on an annual basis, ahead of each AGM season) (the IA Principles).

Neither the Code nor the IA Principles are legally binding, nor do they have the force of law, but they are influential on remuneration design and reflect best practice in corporate governance. The main sanction for non-compliance is that institutional investors may vote against the company's Directors' Remuneration Policy (DRP) or Directors' Remuneration Report (DRR). (See also below: What happens if a company does not comply with the shareholding requirements?).

The IA amended the IA Principles in 2018 to clarify its position on shareholding requirements, making it clear what kinds of shares can count towards the requirements and the expectation of its members in relation to post-employment shareholdings. In November 2019, the IA wrote to Remuneration Committee (RemCo) Chairs to highlight this area

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