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publication"},"repo_path":"spaces/mifid-ii/level-3/q-and-a/esma/esma-qa-1997-payments-to-be-considered-as-remuneration.md","body_sha256":"7f0cc35583958d9a1e7aaa62ec278ac0af62d9d7573be8178e6bb2ee468e40fc"},"units":[],"markdown":"---\ntitle: \"ESMA Q&A 1997 — Q&A — Payments to be considered as remuneration [Answer Published]\"\nshortTitle: \"ESMA Q&A 1997 — Q&A — Payments to be considered as remuneration [Answer Published]\"\nanswer_id: ESMA_QA_1997\ntopic: \"Remuneration\"\nstatus: \"Answer Published\"\ntype: qa\ninstrument_type: qa\nauthority: ESMA\nbinding: false\nbinding_character: non_binding\nlegal_status: in_force\nregulation: \"MiFID II\"\nmifid_level3: true\nmica_level2: false\nlegal_basis: \"MiFID II\"\ndate: 26 October 2023\nsource_link: https://www.esma.europa.eu/publications-data/questions-answers/1997\nlifecycle: \"Answer Published\"\ntext_version: \"ESMA Q&A register, 26 October 2023\"\nsource_url: \"https://www.esma.europa.eu/publications-data/questions-answers/1997\"\ncheck_status: matched\nverified: true\nlast_checked: 2026-10-26\nchecked_against: \"the ESMA publication\"\nsource:\n  prepared_by: \"European Commission\"\n  published_by: \"ESMA\"\n  published_in: \"ESMA Q&A tool\"\n  evidence:\n    prepared_by: \"Answer provided by the European Commission\"\n    locator: \"ESMA Q&A entry ESMA_QA_1997, first line of the answer field\"\ndocument_type: \"qa_answer\"\nlegal_nature: \"not_legislation\"\naddressees: \"not stated in the document\"\ndates:\n  published_on: \"2025-02-28\"\n  question_submitted_on: \"2023-10-26\"\n  locators:\n    published_on: \"ESMA Q&A Excel export ESMA_QA_1997, column 'Esma responses', date line\"\n    question_submitted_on: \"ESMA Q&A Excel export ESMA_QA_1997, column 'Date of submission'\"\nlifecycle_label: \"Answer Published\"\n---\n\n**Answer prepared by the European Commission, published in the ESMA Q&A tool · not legislation · published 28 Feb 2025 [Answer Published]**\n\n*Answer Published · ESMA Q&A register, 26 October 2023 · Checked against the ESMA publication on 26 Oct 2026 · [Official source](https://www.esma.europa.eu/publications-data/questions-answers/1997)*\n\n| | |\n|---|---|\n| **Full title** | ESMA Q&A 1997 — Q&A — Payments to be considered as remuneration \\[Answer Published\\] |\n| **Prepared by** | European Commission |\n| **Published by** | ESMA, in the ESMA Q&A tool |\n| **Reference** | ESMA_QA_1997 |\n| **Document type** | Q&A |\n| **Legal nature** | Not legislation |\n| **Addressees** | Not stated in the document |\n| **Dates** | Published 28 February 2025; question submitted 26 October 2023 |\n| **Legal basis** | MiFID II |\n| **Related instruments** | None recorded |\n| **Text on this page** | Word for word — the full text of the ESMA publication |\n\n**Payments to be considered as remuneration**\n\n### Question\n\nWhen calculating remuneration for small closely held company where the majority owner is also an employee, a member of management and the board, should the dividends he/she earns from his/her shares in the company be added to remuneration?\n\n***\n\n### Answer\n\nAnswer provided by the European Commission\n\nArt 2(5) of Commission Delegated Regulation (EU) 2017/565 defines remuneration as “all forms of payments or financial or non-financial benefits provided directly or indirectly by firms to relevant persons in the provision of investment or ancillary services to clients”.\n\nArt 27 of Commission Delegated Regulation (EU) 2017/565 stipulates that the remuneration policies and practices of the firm is applicable “to all relevant persons with an impact, directly or indirectly, on investment and ancillary services provided by the investment firm or on its corporate behaviour, regardless of the type of clients, to the extent that the remuneration of such persons and similar incentives may create a conflict of interest that encourages them to act against the interests of any of the firm's clients.”\n\nIn the case of a closely held company that provides investment service to clients, where a person, being a majority shareholder, also cumulates different functions involving important decision-making, notably those of a manager and member of the board, the risk of conflict of interest or impact on the corporate behaviour can be considered as high since the payment of dividends may incentivise this person to consider and give preference to his/her own interest over the company’s client interests. Therefore, in that context, the payment of such dividends is to be considered as a ‘remuneration’ defined under Article 2(5) of Commission Delegated Regulation (EU) 2017/565 which triggers the requirements under article 27 of Commission Delegated Regulation (EU) 2017/565 on remuneration policies and practices.\n\nBy analogy, in Case C-352/20, the Court ruled that “a dividend policy of a fund manager may fall within the scope of the provisions of the Directives regarding remuneration where the payment policy of those dividends is such as to induce those employees to take excessive risks which are detrimental to the interests of the UCITS or AIFs managed by that company and to the interests of their investors and is capable of facilitating the circumvention of the requirements flowing from those provisions.\n\nDisclaimer:\n\nThe answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.\n\n***\n\n**Source:** [ESMA original document](https://www.esma.europa.eu/publications-data/questions-answers/1997)\n"}