A series of recent cases have examined the circumstances in which a dividend can be challenged on the basis that it has been unlawfully paid. In one such case, the High Court considered a number of key principles regarding dividend payments and the circumstances in which directors can be pursued for dividends paid prior to an insolvency. This judgment provides some comfort to directors who rely on professional advisers to determine whether to declare a dividend payment.
The draft Companies (Directors' Remuneration Policy and Directors' Remuneration Report) Regulations 2019 were recently published as part of the drive to encourage long-term shareholder engagement and to strengthen the governance and performance of traded companies. Most of the directors' remuneration reporting requirements inserted by the EU Shareholder Rights Directive II already apply under UK law and the draft regulations will implement most of the requirements that do not currently apply.
The Pensions and Lifetime Savings Association recently published guidance on market best practice to assist its members when exercising their vote at annual general meetings in 2019. The revised version of its Corporate Governance Policy and Voting Guidelines reflects the introduction of the 2018 UK Corporate Governance Code, which applies to financial years beginning on or after 1 January 2019.
Small businesses often structure payments to directors who are also shareholders using a combination of dividend payments and salaries. At a time when corporate governance and director and shareholder accountability are under review, a recent Court of Appeal decision gives more reason for directors to ensure that they understand not only their obligations and duties as directors under the Companies Act 2006, but also the implications of relying solely on advice without evaluating it first.
The Investment Association recently published its annual letter to remuneration committee chairs and updated its principles of remuneration for the next annual general meeting season. The key changes to the principles mostly reflect the new UK Corporate Governance Code and specifically address malus and clawback provisions, shareholding requirements and post-employment holding periods, pensions and restricted shares.