Payments for a director’s loss of office
Payments for a director’s loss of office

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Payments for a director’s loss of office
  • Meaning of ‘payment for loss of office’
  • Requirement to obtain shareholder approval
  • Approval of members
  • Exceptions to the requirement to obtain member approval
  • Consequences of a failure to obtain member approval of a payment for loss of office
  • Breach of more than one requirement to obtain member approval
  • Listed and quoted companies

The Companies Act 2006 (CA 2006) contains provisions relating to payments made by a company to a director as compensation for loss of office.

Shareholder approval is required for such transactions as they are considered to be particularly open to abuse. The relationship between these statutory provisions and the general statutory duties of a director is discussed in Practice Note: Directors' duties—scope, nature, interpretation and application.

One of the general duties of a director is the duty to declare to the board if they are in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company of which they are a director and the nature and extent of that interest.

In relation to:

  1. the obligation to declare an interest in a transaction or arrangement with the company, see Practice Note: Declaration of a director's interests—the statutory provisions and

  2. a director’s ability to participate either as a director or a member in decisions regarding such a transaction or arrangement, see Practice Note: Declaration of a director's interests—articles of association

The term ‘director’ for these purposes includes any person occupying the position of director by whatever name called and a shadow director.

Certain companies listed on the London Stock Exchange are subject to additional statutory rules and regulatory requirements as regards the making of severance or loss of office payments to directors. See