In this article, Joseph Brewer, a partner in our listed audit team, reviews the requirements for director remuneration disclosures for UK companies listed on AIM.
Disclosures covering the annual remuneration of directors are of key interest to investors looking to assess the motivations, rewards and incentives of those at the helm of a listed business.
AIM-listed companies face a lighter regulatory burden compared to businesses on the Main Market and other regulated markets. However, disclosures must still meet requirements drawn from a complex array of regulations including the Companies Act 2006, the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, AIM Rules, and UK-adopted IFRS.
The key disclosure requirements from each of these regulations are as follows:
- Companies Act 2006
Section 412 of the Companies Act requires disclosure of the following information:
- Gains made by directors on the exercise of share options;
- Benefits received or receivable from long-term incentive schemes;
- Payments to directors for loss of office;
- Benefits paid in respect of past services of a director;
- Amounts paid to a third party for making available the services of a director;
- Details of director loans including the amount, interest rate and key terms; and
- Details of any guarantees given on behalf of directors, for example if the company has guaranteed a director’s personal loan.
This includes any amounts paid to a connected person or another company controlled by a director.
- The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008
A public limited company (“PLC”) cannot qualify as ‘small’ (Companies Act 2006 section 384) and so these regulations apply to an AIM listed UK company.
Schedule 5 of these regulations sets out the requirement to disclose the following:
- The total remuneration paid to directors;
- The total gains made by directors on the exercise of share options;
- Amounts paid under long term incentive schemes;
- The total pension scheme contributions and disclosure of the number of directors who receive pension contributions;
- Where the total director remuneration is over £200,000, details of the amounts paid to the highest paid director are required, which separate information about the pension contributions attributable to that person. (Note that this is addressed through compliance with AIM rules, see below);
- Certain retirement benefits to current and former directors;
- Total payments made for ‘loss of office’; and
- Total amounts paid to any third parties for director services.
It will be noted there is a certain degree of overlap here with the Companies Act requirements.
- AIM Rules
Under AIM Rule 19, companies must include details of ‘directors’ remuneration’ in their annual report. The requirements include:
- Emoluments and compensation including non-cash benefits;
- Share options and long-term incentive plan details and information on outstanding share options; and
- The value of contributions to a pension scheme.
As distinct from company law, AIM Rules require that an analysis is given split by each director individually.
The majority of AIM listed businesses apply the QCA Code which does not require a separate Remuneration Report; although a company may choose to present the information this way.
- UK-adopted IFRS
A UK company listed on AIM must apply UK-adopted IFRS and therefore the requirements of IAS 24 apply.
IAS 24 contains no specific requirement to disclose director remuneration. However, disclosures are required in relation to ‘key management personnel’, which will always include all statutory directors, although this may also include other senior management.
The disclosure requirements for key management personnel are to provide their total compensation, split by:
- Short term benefits (e.g. salary, annual bonus, private medical benefit etc);
- Post employment benefits;
- Other long-term benefits;
- Termination benefits; and
- Share based payments.
What next?
The director remuneration disclosure requirements for a UK company listed on AIM are complex to navigate and care should be taken to ensure each of the requirements are covered.
Of course, additional information can also be given on a voluntary basis though most businesses will likely find the requirements summarised in this article sufficient!
For further assistance, please contact Joseph Brewer, an audit partner in our London office.
Read our guide to directors’ remuneration for small and medium-sized businesses
