UK restricts executive pay for companies taking COVID-19 loan

UK restricts executive pay for companies taking COVID-19 loan
May 27, 2020

Companies borrowing more than £50 million under the UK government’s revised state-backed Coronavirus Large Business Interruption Loan Scheme are subject to restrictions on dividend and cash bonus payments, executive pay and share buy-backs during the loan period. On 19 May 2020, the government increased the scheme’s maximum permitted loan to £200 million — up from a previous limit of £50 million — with the aim of helping firms that don’t qualify for the Bank of England’s COVID Corporate Financing Facility (CCFF). The restrictions apply to companies taking CCFF loans for more than 12 months, after 19 May. 

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Restrictions

Companies borrowing more than £50 million through the scheme face the following restrictions:

  • Dividend payments. Borrowers cannot make any dividend payments that were not declared before the loan was taken.
  • Share buyback. Borrowers must agree not to make any share buybacks.
  • Executive pay. Borrowers can’t pay cash bonuses or award any pay raises to senior management (including board members), unless the bonuses payments were declared before the loan was taken, or if the payments are similar to those made during the preceding 12 months and don’t materially impact the ability to repay the loan.

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Fiona Webster
by Fiona Webster

Principal, Mercer’s Law & Policy Group

Stephanie Rosseau
by Stephanie Rosseau

Principal, Mercer’s Law & Policy Group

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