In recent years, many of the changes in governance standards and best practices in Canada have resulted from pressure from institutional investors and investor advocacy groups, as well as evolving governance trends that have developed globally.
Corporate governance standards for public companies in Canada are set out in corporate statutes and in securities laws and regulations. In recent years, many of the changes in governance standards and best practices in Canada have resulted from pressure from institutional investors and investor advocacy groups, as well as evolving governance trends that have developed globally. A few of the changes, such as the adoption of virtual shareholder meetings, occurred as a result of the COVID-19 pandemic. Most boards of Canadian public companies in today’s climate are facing a multitude of governance issues requiring ongoing oversight and placing greater demands on directors’ time and attention. At the same time, some influential institutional investors are demanding that public companies and their boards devote more attention to advancing their organizations’ (and their stakeholders’) longer-term interests, including evaluating a company’s performance through an environmental, social and governance (ESG) lens. The challenge is how to manage these competing demands and establish priorities. The answer will be different for each issuer, depending on numerous factors.
Financial Statements and Audit Committees
Canadian law requires public companies to provide investors with annual audited financial statements and quarterly financial statements (which may, but need not, be audited). Financial statements must be accompanied by a management discussion and analysis and supported by certificates signed by the CEO and the CFO. For the most part, all these requirements mirror U.S. requirements. Canadian law requires public companies to have independent audit committees that meet standards that are very similar to the corresponding U.S. requirements. Internal controls over financial reporting are an important part of public company reporting in Canada, but Canadian securities regulators have not adopted the most onerous requirements of SOX 404. In particular, no management report or audit opinion is required. Instead, the CEO/CFO certification has been enhanced to provide comfort about internal controls over financial reporting and disclosure controls and procedures.
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Doing Business in Canada
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