Directors’ Remuneration And Audit – The Impact On UK-Listed Companies

This article looks at the former, noting that these amendments focus on streamlining directors’ remuneration disclosures and reducing administrative burdens while maintaining transparency and shareholder oversight.

The Regulations apply to financial years beginning on or after 11 May 2025, therefore will apply to companies with a 30 June year end for the financial year commencing on 1 July 2025.  For companies with a 31 December year-end, the changes will apply to financial years beginning on 1 January 2026 for reporting in 2027.  

The Government’s policy remains that UK listed companies should disclose annual information on directors’ remuneration, subject to an advisory shareholder vote, and publish a triennial directors remuneration policy subject to a binding shareholder vote.

What Are the Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025?

The 2025 Amendment Regulations modify existing rules governing directors’ remuneration reporting under the Companies Act 2006 and related EU-derived legislation. The primary goal is to remove redundant and overlapping disclosure requirements, making reporting obligations more efficient and business friendly.

Key Changes on Directors’ Remuneration introduced by the 2025 Regulations

1. Simplification of the Directors’ Remuneration Report
   The requirement to compare each director’s pay change with average employee pay changes will be removed. This overlaps with the more detailed requirement to disclose the company CEO pay ratio contained within the Large and Medium-sized Companies and Group (Accounts and Reports) Regulations 2008.

2. Changes to the Single Figure Total Table
   Simplification of this table by removing columns for total fixed and total variable remuneration.

3. Removal of Vesting and Holding Period Disclosure requirements
   To avoid duplication and acknowledge its inclusion in the UK Corporate Governance Code, the 2025 regulations no longer specify requirements for disclosure of vesting and holding periods for share-based awards.

4. Greater Flexibility in Director Payments
   Listed companies will be allowed to make payments to directors outside of the approved remuneration policy, if shareholder approval is obtained.

Impact on UK-Listed Companies

This legislation removes most of the requirements of the revised EU Shareholder Rights Directive, implemented through the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019. This avoids duplication or unnecessary reporting which increases compliance costs for business while making it more difficult for shareholders to identify relevant information in remuneration reports.

While the regulations remove certain reporting obligations, they do not weaken corporate governance. By requiring shareholder approval for any deviations from the remuneration policy, the rules preserve investor influence over executive pay decisions.

This regulation increases shareholders’ oversight by strengthening their role in approving exceptional payments directors through:

• New Power to Approve “off policy” payments – previously if a company wanted to pay a director in a way not already permitted by its approved remuneration policy, it had to revise the whole policy and get shareholder approval – which could be a long process. This gives shareholders a direct say in one-off or exceptional rewards.
• The reform reduces some of the less impactful disclosures rules but strengthens direct shareholder decision-making. Rather than being passive recipients of pages of data, shareholders now have a real influence over actual payments when they fall outside normal boundaries.
• The reform shifts the balance from just “tell the shareholders everything” to “let shareholders actively approve what really matters” – especially when companies want to step outside pre-agreed pay plans.

In Summary

The Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025 represent a significant shift in how UK-listed companies report executive pay. By removing unnecessary disclosure requirements and introducing greater flexibility, the regulations reduce duplication while ensuring shareholder oversight remains strong.

As these changes take effect, companies will need to review their reporting processes, update governance policies, and engage with shareholders effectively to navigate the new regulatory landscape successfully.