On 23 May 2012, BIS published the Enterprise and Regulatory Reform Bill 2012-13. As expected, following its announcement in the Queen's speech on 9 May 2012, section 57 of the Bill proposes the deletion of section 439(5) of the Companies Act 2006 (see PLC Financial Services Legal update, Queen's Speech 2012: financial services implications). The deletion would, if passed into law, remove the statutory provision which prevents a person's entitlement to remuneration to be conditional on the shareholders' approval of a quoted company's directors' remuneration report (as required under section 439(1) of the 2006 Act).

The proposal follows the government's review of responses received to its March 2012 consultation on proposals to give the shareholders of UK incorporated quoted companies greater influence on executive remuneration through enhanced voting rights (see Legal update, Executive pay: BIS consultation paper on enhanced shareholder voting rights). The consultation proposed more wide-ranging executive pay reforms than appear in the Bill, including granting shareholders the power to exercise a binding vote on executive remuneration. The deletion of section 439(5) would not, on its own, give that right to shareholders and the Explanatory Notes to the Bill acknowledge this fact. However, those Explanatory Notes do state that individual companies may amend their articles of association (by special resolution under section 21 of the 2006 Act) to establish that shareholder power. A footnote to the BIS press release published at the same time as the Bill also notes that the government aims to bring forward, later in the legislative process, further detail of how the proposals to give shareholders binding votes on executive pay will work in practice.

Among other aspects of reform proposed by the Bill is the draft legislation to establish the Competition and Markets Authority, bringing together the competition functions of the Competition Commission and the Office of Fair Trading. For more on the competition aspects of the Bill, see Legal update, Enterprise and Regulatory Reform Bill 2012-13: implementation of competition law reforms.

The Bill now begins its passage through both Houses of Parliament.

Sources: Enterprise and Regulatory Reform Bill 2012-13, Enterprise and Regulatory Reform Bill 2012-13: Explanatory Notes and BIS press release: Enterprise and Regulatory Reform Bill 2012-13 published.