Government Reforms Legislation For Termination Benefits

The government has released its draft legislation to broaden the circumstances where shareholder approval will be required for the payment to directors and executives of termination benefits as announced on 18 March 2009. The legislation applies to all companies.

Currently shareholder approval is required for benefits paid in connection with the retirement from office of a director where the benefit exceeds seven times the director's average total annual remuneration (that is the amount required to be disclosed in financial statements about director's remuneration) for the last three years.

The government, as previously announced, proposes to limit the amount to the person's average annual base salary, as determined under the Accounting Standards, during the last three years during which the person held a managerial or executive position. For shorter periods there are shading in provisions.