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Impact of the law of 28 april 2020 on listed companies: new rules as regards to remuneration

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06/05/2020

On 28 April 2020, the law implementing Directive (UE) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/CE as regards the encouragement of long-term shareholder engagement (SRD II) and making various provisions relating to companies and associations has been adopted.

The first part of the Law implements SRD II and introduces new obligations for listed companies, in particular with respect to remuneration of directors and managers and to the control of transactions with related parties. The second part is a repair law of the Companies and Associations Code (CCA).

This newsletter deals with the topic of remuneration and in particular with the remuneration policy and the remuneration report (please refer to our next newsletters on the other topics).

Remuneration policy - The Law enshrines the principle of “say on pay”, which ensures that shareholders have an effective say on remuneration policy. While today the remuneration policy is part of the remuneration report, which is submitted to a consultative vote by the shareholders’ general meeting, the vote by the general meeting on the remuneration policy will be binding and will be required after each significant amendment and at least every four years. Listed companies may only pay directors, managers and daily managers on the basis of the remuneration policy approved by shareholders (CCA, new art. 7:89/1). This policy must be submitted for the first time to the shareholders’ general meeting which deliberates on the annual financial report relative to the first financial year starting after 30 June 2019.

The remuneration policy must specify how it contributes to the company's business strategy, its long-term interests and sustainability. It must in particular include the different components of fixed and variable remuneration (including clear, detailed and various criteria for the attribution of variable remuneration), the manner in which the terms and conditions of remuneration and employment of the company's employees have been taken into account when establishing the remuneration policy, for remuneration in shares, the period of acquisition and detention of the shares, the duration of agreements and notice periods, and the characteristics of supplementary or early retirement schemes.

The remuneration policy must be published on the company’s website.

Remuneration report - The company will have to explain in its remuneration report how the total remuneration complies with the remuneration policy and contributes to its long-term performance. The remuneration report will include new information, in particular the details of the remuneration of the directors, members of the executive board and supervisory board and daily managers on an individual basis and the ratio between the highest remuneration of the directors and managers and the lowest remuneration of the employees (CCA, new art. 3:6, §3).

The vote of the shareholders’ general meeting on the remuneration report shall remain consultative but the company will have to explain in its next report how it has taken this vote into account (CCA, new art. 7:149, par. 3).

The new rules concerning the remuneration will be applicable for the first time to the remuneration report relative to the first financial year starting after 30 June 2019.

 

If you have any questions, please feel free to contact Valérie Simonart & Olivia Szerer.