A narrative report directors of quoted companies are required to prepare under CA 2006, s 420 in respect of each financial year of the company.

Observing good practice in relation to the remuneration of a company’s directors is an important aspect of corporate governance. A central part of the UK’s corporate governance regime is the UK Corporate Governance Code (the UKCG Code). It is administered by the Financial Reporting Council (FRC), which also publishes guidance to supplement it. To meet certain requirements of the UK Listing Rules (UKLRs), a company with a listing of equity shares in the equity shares (commercial companies) category or the closed-ended investment funds category must apply the principles of the UKCG Code and comply with, or explain why it has not complied with, each of its provisions in its annual report and accounts. In addition, many other companies choose to apply the principles of the UKCG Code and comply or explain under its provisions, although they are not required to do so and may choose to adopt another corporate governance code that is more appropriate (see Practice Note: The corporate governance regime—fundamentals). The UKCG Code sets out standards of good practice for the management of those companies,

This Practice Note provides coverage of the corporate governance guidelines relating to executive director remuneration reporting and shareholder voting as laid down by the main proxy advisors to institutional investors. It covers the guidance of the IA, Pensions UK, Glass Lewis and PIRC. Other guidance is also referred to, including from the GC100 and Investor Group, the QCA and the AIC. Recent debate over directors’ remuneration The remuneration of quoted company executive directors is subject to greater shareholder, media and political scrutiny than ever before. In addition to the legislation and corporate governance regulation relating to executive remuneration, proxy advisors such as the Investment Association (IA), Pensions UK (formerly PLSA), Institutional Shareholder Services (ISS), Glass Lewis, the Local Authority Pension Fund Forum (LAPFF) and Pensions & Investment Research Consultants Ltd (PIRC) each produce their own guidelines on executive remuneration and make recommendations to their institutional shareholder members on voting strategy and other aspects of good stewardship. Given the significant shareholdings in listed companies held by institutional investors and the fact that many investors rely heavily on proxy

This Practice Note outlines the regulatory framework for remuneration of directors of quoted companies against the current backdrop of increased shareholder activism and media attention on executive pay packages. It summarises the statutory directors' remuneration reporting regime for quoted companies and notes relevant provisions of the Companies Act 2006 (CA 2006), the UK Listing Rules (UKLR), the UK Corporate Governance Code (UKCG Code) of the Financial Reporting Council (FRC) and best practice guidelines relating to executive remuneration. Directors’ remuneration—law, regulation and best practice Legislation The CA 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, SI 2008/410 (2008 Regulations) impose requirements on the directors of a quoted company to disclose prescribed details of directors' remuneration in a remuneration report to be prepared annually. CA 2006 defines a quoted company as a UK company whose equity share capital: • has been included in the Official List of the London Stock Exchange • is officially listed in an EEA state, or • is admitted to dealing on the New York Stock Exchange or NASDAQ The

Under CA 2006, s 415 the directors of a company must prepare a narrative report containing specified information for each financial year of the company. Detailed provisions governing the content of directors' reports are set out in regulations made under CA 2006, s 416(4). The exact requirements depend on the size of the company and the year for which the report is being prepared. For financial years ending on or after 30 September 2013, the requirements in relation to the directors’ report changed. Relevant companies must now produce a strategic report, a separate stand-alone report which replaces the business review formerly required to be included as part of the directors' report. CA 2006, s 415(1A) provides an exemption from the requirement to prepare a directors' report in respect of a company that qualifies as a micro-entity.

This Practice Note summarises the requirements to include directors’ responsibilities statements within the annual accounts and reports of certain companies under the Disclosure Guidance and Transparency Rules, the UK Corporate Governance Code and the UK Listing Rules. A company's annual report and accounts will often include an appropriate description of directors' relevant responsibilities for the preparation of those accounts. Certain companies are legally required to include such directors' responsibility statements and other companies include them as a matter of best practice. This Practice Note summarises the requirements to include directors’ responsibilities statements within the annual accounts and reports of certain companies under the Disclosure Guidance and Transparency Rules (DTRs) of the Financial Conduct Authority (FCA), the UK Corporate Governance Code (UKCG Code) of the Financial Reporting Council (FRC) and the UK Listing Rules of the FCA (UKLRs). The origins of the directors' responsibility statement can be found in the 1992 Cadbury report, which recommended that the report and accounts of a company should include a formal statement by its directors to the effect that responsibility

This Practice Note focuses on the additional statutory and regulatory requirements applicable to UK listed companies in relation to directors’ service contracts, covering relevant provisions of the Companies Act 2006 (CA 2006), the UK Listing Rules (UKLR) of the Financial Conduct Authority (FCA) and the UK Corporate Governance Code (UKCG Code) published by the Financial Reporting Council (FRC). It also highlights guidance issued by The Chartered Governance Institute (CGI) and institutional investor best practice guidelines. All UK companies, including listed companies, are subject to the provisions of CA 2006. Companies (both UK and overseas) with a with a listing of equity shares in the equity shares (commercial companies) category on the London Stock Exchange (listed companies) are further subject to: • the UKLR (see Directors’ service contracts—listed companies — The UK Listing Rules, below) • the UKCG Code (see Directors’ service contracts—listed companies — The UK Corporate Governance Code, below), and • guidance issued by the CGI and best practice guidelines issued by bodies representing institutional investors and pension funds, such as Pensions UK (previously, the Pensions

Ordinary resolution [ That the term in the service contract proposed to be entered into between the Company and [insert name of director] providing that the period during which their employment [ [is to continue OR may be continued] otherwise than at the instance

ORDINARY RESOLUTION [ That the term in the service contract proposed to be entered into between the Company’s subsidiary, [insert name of subsidiary], and [insert name of director] providing that the period during which their employment [ [is to continue OR may be continued] otherwise than at the instance

The Companies Act 2006 (CA 2006) requires a company to: • retain copies of directors’ service contracts • make copies of directors’ service contracts available for inspection, and • provide copies of directors’ service contracts to any member of the company, upon request The term ‘director’, for the purpose of these provisions, includes any person occupying the position of director, by whatever name called (ie, whatever the official title used), and a shadow director. In relation to other obligations that a company may have in relation to directors’ service contracts, see Practice Note: Directors’ long term service contracts. Companies with a listing of equity shares in the equity shares (commercial companies) category on the London Stock Exchange are subject to additional regulation in relation to directors’ service contracts; for further details see Practice Note: Directors’ service contracts—listed companies. The Chartered Governance Institute has produced guidance on directors' service contracts which covers, among other things, the regulatory framework governing service agreements between companies and their directors and key provisions to be set out

Company number: [insert number] [insert company name] Limited Payment out of capital to redeem shares in the company Directors’ statement We, the undersigned, [enter name of director] of [enter address] [enter name of director] of [enter address] [enter name of director] of [enter address] being all the directors for the time being of the Company, hereby state in accordance with section 714 of the Companies Act

Company number: [insert number] [insert company name] limited (the Company) PURCHASE OF OWN SHARES OUT OF CAPITAL DIRECTORS’ STATEMENT MADE UNDER SECTION 714 OF THE COMPANIES ACT 2006 (CA 2006) The Company proposes to purchase [insert number] [insert class] shares of [insert nominal value] each in the capital of the Company from [insert name of seller(s)] (the Seller[s]) pursuant to the terms of the [draft] contract [dated [insert date]] between the Company and the Seller[s]. There is to be a payment out of