Public companies are required to have a whistleblower policy and process in place for employees.
We can assist you in the implementation of an ethics hotline and risk management system in an efficient, cost-effective and seamless manner. A customizable WhistleBlower system is a powerful tool; not only because it meets the compliance challenge but also shelters your business, corporate asset, executives, board members, investors and employees in the long run. So when looking for a system that suits your business, make sure you know exactly what you need. And if you can’t find it, don’t worry — what we offer is an integrated system that can be customized to suit you and your business.
WhistleBlower Security offers services to meet the US requirements of Sabanes Oxley and Canadian Multi-Lateral Instrument 52-110 which requires that public companies have a policy and procedure in place to deal with the receipt, retention and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and
(b) the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters.
With an easy to use system, WhistleBlower will ensure that you meet this requirement and also introduce a tool that employees will appreciate and feel safe to sue.
Other Regulatory Obligations
Although regulatory requirements are similar in Canada and the United States, the rules must be followed closely and therefore you should know exactly what is required of a public company in one country, versus the other.
From a regulatory compliance perspective, the securities commissions have published a number of rules and policies that have been codified in national instruments, which provide requirements and guidance. These national instruments are updated on a periodic basis. The most commonly used instruments deal with continuous disclosure and certification requirements.
These requirements include:
- Financial Statements
- Management’s Discussion and Analysis (“MD&A”)
- Annual Information Form (“AIF”)
- Material Changes
- Business Acquisition Report (“BAR”)
- Certifications
Financial Statements
A reporting issuer must file annual financial statements prepared in compliance with Canadian generally accepted accounting principles, with comparative figures, if applicable, which must be accompanied by an auditors’ report. The annual financial statements and auditors’ report must be filed with the relevant securities commission within 90 days of year end for non-venture issuers and within 120 days for venture issuers.
A reporting issuer must also file interim financial statements. The interim financial statements must include a balance sheet as at the end of the interim period and a balance sheet as at the end of the immediately preceding fiscal period, income and cash flow statements for the most recently completed three month period and year-to-date results, with comparative figures, and notes. The interim financial statements are due within 45 days of the interim period for non-venture issuers and within 60 days for venture issuers. For many companies, the Audit Committee will require that auditors to perform an interim review of these financial statements. If an auditor has not performed a review, the interim financial statements must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
Both the interim and annual financial statements must be approved by the Board of Directors. The Board may delegate this responsibility to the Audit Committee.
Management’s Discussion and Analysis (“MD&A”)
A reporting issuer must file its annual and interim financial statements with an MD&A. The MD&A is a narrative explanation, through the eyes of management, of how the company performed during the period covered by the financial statements, and of the company’s financial condition and future prospect. The MD&A should complement and supplement the disclosures in the financial statements and must be approved by the Board of Directors. The Board may delegate this responsibility to the Audit Committee.
The objective of the MD&A should be to improve a company’s overall financial disclosure by giving a fair and balanced overview of the company’s results of operating and financial condition. The MDA would include the following disclosures:
- A summary of the overall performance of the company, including trends, capital commitments and uncertainties and risks effecting the business
- An analysis of operating results comparing the current year to prior year, along with an assessment of recently completed quarters
- A discussion on liquidity, compliance with covenants and capital resources
- Any off-balance sheet arrangements
- Transactions with related parties
- Critical accounting estimates
- Changes in accounting policies including initial adoption
- Financial instruments
Annual Information Form (“AIF”)
The AIF must be filed within 90 days of the entity’s fiscal period, and includes some of the disclosure requirements normally found in a long-form prospectus. The purpose of the AIF is to describe the business, its operations and prospects, risks and other external factors that could directly impact the company. The AIF should also include a general description of its capital structure, the market for its securities, and an overview of its directors and officers. Venture issuers are exempt from this requirement.
Material Changes
A purpose of disclosure requirements is to provide all investors with relevant information about the business affairs of the company. Such a material change may include disclosure of a potential financing, acquisition, or change in management. A reporting issuer must file a release authorized by a senior officer disclosing the nature and substance of the material change, and within 10 business days, file a report with the relevant securities regulator containing similar information. We encourage management to obtain legal advice on what events or transactions are deemed to be material to the business.
Business Acquisition Report (“BAR”)
If a reporting issuer completes a significant acquisition, it must file a business acquisition report within 75 days after the date of the acquisition. The purpose of the business acquisition report is to describe the significant business acquired and the effect of the acquisition on the business. An acquisition is deemed to be significant if it meets certain quantitative measures based on size of the assets, and the reporting issuer’s net investment in the acquired business or income.
If the acquisition is considered significant, the business acquisition report must include audited financial statements of each business, interim financial statements of the acquired business for the most recently completed interim period after the date of the audited balance sheet and before the acquisition date, and pro-forma financial statements.
Certifications
Non-Venture reporting issuers are required to provide interim and annual certifications over disclosure controls and procedures (“DC&P”) and internal controls over financial reporting (“ICFR”). The certifications are generally signed by the chief executive officer and the chief financial officer. The purpose of these certifications is to improve the quality, reliability and transparency of annual, interim and other information that reporting issuers have to file.
The certification requires the certifying officers to attest that the information that is disclosed by the company is fairly presented and contains no misrepresentations. In addition, they must certify that the disclosure controls and procedures and internal controls over financial reporting are designed and operating effectively. Further, they must disclose in their annual MD&A their conclusions about the effectiveness.
Given Venture issuers generally have few employees and limited financial resources, they are not required to certify on the design and operating effectiveness of DC&P and ICFR. However, they must still certify that the information that has been disclosed is fairly presented and contains no misrepresentation.
SEDAR
The above continuous disclosure documents can be found on SEDAR http://www.sedar.com/. The filings can be made directly by the company or a filing agent, acting on behalf of the company.
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