The draft Companies Amendment Bill 2021 (“the Bill”) has been published for public comment during October 2021, and aims to amend the existing Companies Act 2008.
This Bill introduces a new section 30A which deals with a company’s remuneration policy and remuneration report. The section only applies to public or state owned companies, and not to private companies. (However, in respect of state owned companies, we will query the drafters regarding whether or not this remuneration policy must be approved by other government departments already, in which case this section would need to be aligned with those existing requirements).
1.1 The Remuneration Policy:
1.1.1 This new section would require a public and state owned company to prepare and present a remuneration policy for its directors and prescribed officers which must be approved by the company’s shareholders by ordinary resolution.
1.1.2 The company must do this every three years, or whenever there is a material change to its existing renumeration policy.
1.2 What Policy to implement if the Proposed Remuneration Policy is not approved:
1.2.1 The Bill says that where the proposed remuneration policy is not approved by ordinary resolution, it must be presented at the next annual general meeting or at a meeting called specifically for this purpose, until the approval is obtained.
1.2.2. The Bill however doesn’t include sufficient clarification for what happens in the interim when a remuneration policy is not approved. We will propose to the Department of Trade and Industry to amend the Bill to record, for example, that until the policy is approved it cannot be implemented, and the existing, approved policy must continue to apply; and that the Bill needs to record what must be done if there is no existing, approved policy (because none has been approved since this new requirement under the Bill became law). At the very least, it could record that the remuneration that the Company was paying immediately before this section came into force would be deemed to be its policy until a new one was approved.
1.3 Requirement for certain Non -Executive Directors to Stand Down if Policy is not Approved:
1.3.1 The Bills says that if the proposed remuneration policy is not approved by ordinary resolution, “the non-executive directors that serve on the directors’ committee responsible for remuneration shall be required to stand down for re-election every year of such rejection”. There are numerous problems with this sub-section, including:
1.3.1.1 it is unclear if they must stand down from the board, or just from the remuneration committee;
1.3.1.2 if they must stand down from the board, there will be a loss of institutional memory if all such non-executives need to stand down, and as such, we will propose that only 50% of the non-executives need to stand down.
1.4 The Remuneration Report:
1.4.1 The Bill also obliges a company to prepare a remuneration report containing, amongst other items, the details of remuneration and benefits received by each director and prescribed officer, and the total remuneration, including all salary, benefits (including employer contributions to benefit funds) and incentives (bonuses) of the employee of the company with the lowest total remuneration in the company’ (“the Report”).
1.4.2 The company must present this Report to its shareholders at an annual general meeting, and be voted on by the shareholders to approve it. We think, being a factual board report, that it is incorrect that the shareholders should need to vote on it. We will propose that this requirement is deleted from the Bill.