Recent Developments for UK PLCs — November 2024

UK Investment Association Publishes More Flexible Principles of Remuneration

On 8 October 2024, the Investment Association (IA) updated its Principles of Remuneration (and supporting guidance) (the IA Principles). These principles, and the accompanying guidance, are significantly more flexible and less prescriptive than previous iterations — and reflect the progressive market discussions on executive remuneration that have taken place in the UK in the last couple of years.

The revised IA Principles comprise three simplified, overarching principles focusing on:

• long-term value creation through aligning pay and corporate strategy;
• performance criteria that support the sustainable, long-term financial health of the business and sound risk management; and
• delivery of performance-linked remuneration.

The guidance to the revised IA Principles outlines “commonly accepted approaches” to executive pay, as well as emphasising throughout the importance of proactive engagement with shareholders to understand their views and expectations, where possible.

The new flexible guidance will be a welcomed development for many UK companies and their shareholders, looking to embrace more dynamic and competitive remuneration structures to attract and retain global talent, particularly those businesses with a significant US footprint. For further details, please see this Latham blog post.

Expert Panel Proposes Two-Way Corporate Re-Domiciliation Regime

On 1 October 2024, the Independent Expert Panel on Corporate Re-domiciliations published a report setting out its proposed legal framework for a new UK re-domiciliation regime. Re-domiciliation allows a company incorporated in one jurisdiction to become a company incorporated in another jurisdiction while retaining its legal personality.

Key points from the report:

• The expert panel strongly supports the introduction of a two-way re-domiciliation regime that allows overseas incorporated companies to redomicile into the UK and UK companies to re-domicile abroad. The panel believes this flexibility would increase the overall attractiveness of the UK as a place to do business.
• The detailed report suggests how the re-domiciliation process could work (including proposed eligibility requirements and information required for a re-domiciliation application). The report proposes that re-domiciliation to the UK should be available to companies which are solvent and intend to carry on business following their re-domiciliation.
• The report considers how companies re-domiciled to the UK would be treated under company, tax, accounting, and insolvency requirements. The report suggests that once a company has re-domiciled to the UK, it should as far as possible be treated in the same way as a company originally incorporated in the UK.

By way of recap, the UK government initiated its public consultation on the proposed re-domiciliation regime back in October 2021 and subsequently established the expert panel to create a specific proposal for changing the legal framework to enable such re-domiciliations.

The government has welcomed the panel’s report and intends to consult in due course on a proposed regime design. Although this report marks a further step in the introduction of a UK re-domiciliation regime, further substantial consultations would likely be required to address complex legal, tax, and accounting considerations that impact such re-domiciled companies.

Institute of Directors Launches Voluntary Code of Conduct to Aid Directors’ Decision-Making

On 23 October 2024, the Institute of Directors (IoD) launched its Code of Conduct for Directors covering ethical and behavioural commitments that it suggests directors undertake in order to build and maintain the trust of the wider public in their business activities.

The code is structured around six key “Principles of Director Conduct”:

• Leading by Example — demonstrating exemplary standards of behaviour in personal conduct and decision-making
• Integrity — acting with honesty, adhering to strong ethical values, and doing the right thing
• Transparency — communicating, acting, and making decisions openly, honestly, and clearly
• Accountability — taking personal responsibility for actions and their consequences
• Fairness — treating people equitably, without discrimination or bias
• Responsible Business — integrating ethical and sustainable practices into business decisions, taking into account societal and environmental impacts

Although the code may be a useful reference point when formulating internal policies, large listed companies are likely to already have established codes of conduct that regulate the behaviour of their directors and employees. Further, listed companies should in any case have regard to their statutory duties under the Companies Act (whose requirements override any voluntary code of conduct) and the UK Corporate Governance Code which contains recommendations and guidance of greater relevance to the conduct of directors of listed companies.