Clifford Chance

Corporate Update

30 January 2012

Welcome to the latest edition of our bi-annual newsletter Corporate Update which provides a round-up of the latest developments in company law and corporate finance regulation over the last six months.

As difficult economic conditions persist, questions continue to be asked about the perceived imbalance between executive pay and company performance. This issue has been put firmly in the spotlight by the recent announcement by Vince Cable, Secretary of State for Business, of the Government’s new plans for the regulation of executive pay. Two key areas are to be targeted: how executive remuneration is to be determined and how companies must report on remuneration. Whilst the fine detail of the new proposals is yet to be made public, the Government intends that shareholders should have a "binding" vote on (i) future pay policy for the Board as a whole; (ii) notice provisions exceeding 12 months in the contracts of new executives; and (iii) on termination payments in excess of 1 years’ salary. The Government also intends to ask the Financial Reporting Council to consult on an amendment to the Corporate Governance Code to require large plcs to include a claw-back mechanism in executive contracts for variable remuneration. With details of these proposals due to be published shortly, there is no danger of the issue of executive pay moving out of the spotlight anytime soon.

There are also developments afoot on the European front which will be of interest and, potentially, concern to issuers. In particular, the European Commission’s proposals for a new Market Abuse Regulation contain an expanded definition of what constitutes “inside information” which would not require the information to be either precise or price sensitive. The breadth of the new definition is likely to raise difficult questions for directors and others privy to company confidential information when trying to identify whether such information is “inside information”. See our “Regulatory Update” for more details.

The above issues, along with a host of other recent corporate developments relevant to companies and their advisers are discussed in this edition of Corporate Update.

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