The Member States of the European Union shall bring into force the laws, regulations and administrative provisions necessary to comply with the EU Directive 2017/828 which establishes requirements in relation to the exercise of certain shareholder rights attached to voting shares in general meetings of companies by 10 June 2019. The most sensitive part of the directive is that it makes the remunerations of the directors public.
The Hungarian legislator have prepared the bill for transposing the regulations of the directive. The bill grants the right of the shareholders to hold a binding or advisory vote on the remuneration policy and also on the company’s remuneration report, which until now was only a mere recommendation by the European Commission. Furthermore, it contains rules for the remuneration policy of the directors of these companies and also for the assessment of the directors’ performance.
The bill – consistent with the directive – interprets broadly the definition of the directors (i.e. executive officers, members of the supervisory board). The most sensitive part of the new bill is the obligation of preparing remuneration report, which must be published in every year and it must remain publicly available for at least 10 years. The remuneration report should contain for instance the directors’ total remuneration split out by component, the relative proportion of fixed and variable remuneration with names, and also any remuneration from any undertaking belonging to the same group. It serves to increase corporate transparency, the accountability of directors and to enable shareholders, potential investors and stakeholders to obtain a full and reliable picture of the remuneration of each director.
The bill, consistent with the amended directive, is without prejudice to the provisions laid down in any sector-specific legislative act regulating specific types of company or specific types of entity, such as credit institutions, investments firms, asset managers, insurance companies and pension funds.
By Levente Csengery, Partner, KCG Partners Law Firm