The Company Accounts (Disclosure of Directors' Emoluments) Regulations 1997

Explanatory Note

(This note is not part of the Regulations)

These Regulations amend provisions in Part I of Schedule 6 to the Companies Act 1985 (c. 6) (“the 1985 Act”) relating to the disclosure of directors' emoluments or other benefits in the notes to a company’s annual accounts in respect of any financial year. They also make amendments to section 246 of the 1985 Act, as amended by the Companies Act 1985 (Accounts of Small and Medium-sized Companies and Minor Accounting Amendments) Regulations 1997 (S. I. 1997/220).

Regulation 1 provides for the citation, commencement and interpretation of the Regulations.

Regulation 2 substitutes a new paragraph 1 of Schedule 6 (aggregate amount of directors' emoluments etc.) which makes the following provision:—

(a)Companies are required to show, separately, the aggregate amount of directors' emoluments, the aggregate amount of gains made by directors from share options, the aggregate amount of money or other assets (other than share options) paid to or received by directors under long term incentive schemes and the aggregate value of company contributions in respect of directors to pension schemes where those contributions are in respect of money purchase benefits;

(b)Companies are also required to state the number of directors who are accruing benefits under, respectively, money purchase pension schemes and defined benefit pension schemes;

(c)An unlisted company is exempted from the requirement to show share option gains by its directors and the value of any shares receivable by them under long term incentive schemes, but must show the number of directors who exercised share options and who received or became entitled to shares under long term incentive schemes;

(d)Under paragraph 1(6)(a) a company need not show any information, other than that relating to share option gains, if it is readily ascertainable from other information which is shown.

Regulation 3 substitutes a new paragraph 2 (details of highest-paid director’s emoluments etc.) for paragraphs 2 to 6 of Schedule 6. Firstly, the paragraph fixes the aggregate emoluments threshold above which disclosure in respect of the highest paid director is required at £200,000. Where those aggregates exceed £200,000 there shall be disclosed the proportion attributable to the highest paid director. Secondly, there is a requirement to disclose the amount of the highest paid director’s accrued retirement benefits, if he is a member of a defined benefit scheme, other than money-purchase benefits or those benefits arising from voluntary contributions made by that director. Where the company is unlisted, whether the highest paid director exercised share options or received, or became entitled to shares, under long term incentive schemes, is also to be shown. The requirements previously imposed under paragraphs 2 to 6 of Schedule 6 are repealed.

Regulation 4 substitutes a new paragraph 7 of Schedule 6 (excess retirement benefits of directors and past directors). The effect of the paragraph is to require companies to disclose increases in the amount of retirement benefits paid to directors or past directors in excess of the amounts to which they were entitled when the benefits became payable unless those excess benefits were paid to all members of the relevant scheme on the same basis and were paid without recourse to additional contributions.

Regulation 5 makes amendments to paragraph 8 of Schedule 6 (compensation to directors for loss of office). The effect of the amendments is to include payments in respect of breach of contract within the scope of the meaning of the term “compensation for loss of office”.

Regulation 6 contains amendments to section 246 of the 1985 Act (special provisions for small companies) applying Schedule 6 as amended by these Regulations to small companies. It also makes other minor and consequential amendments to paragraphs 10, 11 and 13 of Schedule 6.

An assessment of compliance costs for companies is to be placed in the libraries of both Houses of Parliament. Copies can be obtained by post from the Company Law Directorate, Department of Trade and Industry, 5.M. 15, 1 Victoria Street, London SW1H 0ET.