New Rules Concerning Certification of Disclosure in Annual and Interim FilingsJanuary 29, 2009
Canada’s security regulators have introduced new reporting and certification requirements through the implementation of National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings (NI 52-109) which replaces Multilateral Instrument 52-109.
Reporting issuers (other than investment funds) completing annual and interim filings for financial periods ending on or after December 15, 2008 are subject to NI 52-109.
Summary of Changes Introduced by NI 52-109
- CEO’s and CFO’s, or officers acting in those capacities, must certify annually that they have evaluated the effectiveness of the issuer’s disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR) and disclosed their conclusions in the issuer’s annual MD&A.
- Certifying officers must certify annually that they have disclosed to the issuer?s auditors and directors or audit committee any fraud involving management or other employees with a significant role in ICFR.
- Any material weaknesses in the design or operation of ICFR are to be disclosed in the issuer’s MD&A, quarterly for design weaknesses and annually for operation weaknesses, and certifying officers must certify that the required details have been disclosed.
- Non-venture issuers must use a control framework to design the issuer’s ICFR and certifying officers must state which particular control framework has been used by the issuer. Issuers may be permitted to limit the scope of the design of DC&P and ICFR to exclude controls, policies and procedures of (i) a proportionately consolidated entity or variable interest entity in which the issuer has an interest or (ii) a business that the issuer acquired not more than 365 days before the issuer’s financial year end. Issuers must disclose in its MD&A any such exclusion and provide summary financial information for any excluded entities.
Venture issuers are not required to refer to DC&P or ICFR in their annual and interim certificates and do not have to make the related MD&A disclosures.
With respect to the first financial period after an initial public offering, reverse takeover or becoming a non-venture issuer, certifying officers are not be required to refer to DC&P or ICFR in their certificates and do not have to make the related MD&A disclosures.
What do you need to do?
Management should consult NI 52-109 and the related Companion Policy 52-109 which provides guidance on various topics including: suitable control frameworks, design of DC&P and ICFR, evaluating operating effectiveness of DC&P and ICFR and identifying a material weakness.
This update is a general overview of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be happy to discuss the points raised here with you.