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Senior Partner
Senior Partner, Solicitor
Category: Law
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Is there a general legal requirement to obtain board authorisation

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Is there a general legal requirement to obtain board authorisation advance on remuneration paid to a director? (Specifically the payment would be related to a future expected bonus, based on a formula.)
Submitted: 2 years ago.
Category: Law
Expert:  Nicola-mod replied 2 years ago.
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Expert:  Ash replied 2 years ago.
my name is ***** ***** I will help you with this.
No. Directors &S do not require shareholder approval before appointment. It is other Directors to take responsibility .
Quoted companies are subject to a requirement to include a statement in their directors' remuneration report setting out how they have taken employee pay and employment conditions into account when determining directors' pay relevant financial year.
So sadly no, there is no legal requirement .
Can I clarify anything about this today please?
Alex
Expert:  Senior Partner replied 2 years ago.
I am afraid my colleagues answer is not correct or comprehensive. Directors are not entitled to remuneration as directors unless approved by the shareholders. They can be entitled to remuneration under a contract of employment but the terms of such a contract would normally require board approval. A director has to be appointed by the board or the shareholders. Unless the power to set director remuneration is expressly delegated say to the chief executive it is up to the board to fix executive pay. You do not explain how the future variable pay has been agreed but it should be approved by the board .
Customer: replied 2 years ago.
Thank you. So would a (genuine) loan be classified as 'remuneration' and require advance board approval?
Expert:  Senior Partner replied 2 years ago.
Loans to directors generally require shareholder approval. There are exceptions of expenses on company business up to £50,000 and transactions up to £10,000. An advance on commission or a bonus would amount to a loan. In all cases of a loan to a director unless a very small advance of expenses allowed his employment would need board approval - it also requires disclosure in the accounts. A director would have to disclose the loan to the board in any event unless it had been expressly approved by the board under the general obligations of disclosure.
If this is a small private company it ough to be possible to get the necessary approvals without issue. Someone has to sanction the arrangement anyway. I director cannot authorise a payment to himself - that might be fraud or theft unless it is within an express authority from the board
Senior Partner, Solicitor
Category: Law
Satisfied Customers: 13325
Experience: Solicitor with more than 30 years experience
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Customer: replied 2 years ago.
Thank you comprehensive answer.