Board of Directors – Mandate
The Board of Directors is responsible for the supervision of the Corporation’s business and affairs. Although management conducts the day-to-day operations of the Corporation, the Board has a duty of stewardship and regularly assesses and monitors Management’s performance. The Board approves all matters expressly required by its mandate, under the Canada Business Corporations Act, applicable laws and the articles and by-laws of the Corporation outside the normal course of business of the Corporation. When authorized by the Corporation’s applicable legislation, the board may assign to board committees the prior review of any issues it is responsible for. The board committee recommendations are subject to the Board approval.
The responsibilities of the Board of Directors include the following:
- approving the Corporation’s long-term strategy as well as its annual business plan,
- advising Management on strategic issues,
- assessing the risks relating to the operation of the Corporation,
- approving the appointment of Management,
- assessing the performance of the Management,
- approving the compensation of the Management,
- monitoring the integrity and quality of the Corporation’s consolidated financial statements and the appropriateness of their disclosure,
- reviewing the general content of any document required by regulatory authorities in Canada to be prepared or disclosed by the Corporation,
- overseeing Management in the competent operation of the Corporation,
- reviewing the integrity of internal controls of the Corporation and
- ensuring the annual performance assessment of the board, board’s committee and of individual directors.
Meetings of the Board are held at least quarterly and on a required basis. In addition, a meeting of the Board is held annually, to review the strategic plan of the Corporation. The Chairman of the Board, sets the agenda for each meeting of the board. The agenda and the appropriate material are provided to directors of the Corporation prior to any meeting of the Board.
Mandate of the audit committee
1. Statement of Policy
The Audit Committee’s role is to establish a framework (policies, guidelines, accountability statement, etc.) in order to set and clearly state for all levels of the Corporation, the Committee’s expectations as to the quality and quantity of financial information it expects to receive and eventually disclose.
The President and Chief Executive Officer and Chief Financial Officer determine the systems, procedures and internal controls required to meet the expectations of the Audit Committee and are accountable to the Audit Committee.
The Audit Committee analyzes the risks which the Corporation faces and determines if the measures taken by management are appropriate to counter those risks.
The Audit Committee supports the Board of directors in the accomplishment of its obligations toward the shareholders of the Corporation, the financial community and any other interested person, and within such context:
- Ensures that the Corporation’s financial statements, financial information and other information disclosed by the Corporation are complete and accurate;
- Supervises the management of the accounting and internal controls systems;
- Periodically review the status and findings of the independent auditors’ audit program and the internal audit program;
- Discusses with management, at least annually, the guidelines and policies followed by management with respect to risk assessment and risk management and the major financial risk exposures and the steps to monitor and control such exposures;
- Reviews major issues regarding accounting principles and financial statement presentation, including any significant changes in the selection or application of accounting principles to be observed in the preparation of the accounts of the Corporation and its subsidiaries, or their application;
- Prepares such reports of the Committee as may be required by any applicable law or stock exchanges or other securities regulatory authorities to be included in the proxy circular and statement or any other public disclosure document of the Corporation and reviews the disclosure to be contained in the proxy circular and statement or any other public disclosure document of the Corporation of the services performed and the fees paid to the independent auditors.
The Audit Committee maintains an honest and open dialogue with the external auditors, the management and the senior administrators and accountants of the Corporation. The Audit Committee has the authority to analyze and make recommendation on all issues brought to its attention. To fulfill its mandate, the Audit Committee may access, on demand, any relevant documentation on the operations of the Corporation, whether such information is in the hands of the Corporation, an affiliate or a person related to the Corporation.
The Audit Committee may, at its discretion, retain the services of external advisers.
2. Responsibilities of the committee
Broadly, the mandate of the Audit Committee is to oversee the Corporation’s financial reporting procedures and report thereon to the Board. It is not the duty of the Audit Committee to plan or conduct audits, nor to determine that the Corporation’s financial statements are complete, accurate and are in accordance with the Canadian generally accepted accounting principles. With respect to these questions, the Committee, having made the necessary inquiries in view of the existing circumstances and having ascertained the adequacy of the Corporation’s internal controls, shall rely on the accounting and financial expertise of the Chief Financial Officer and the President and Chief Executive Officer who are responsible for the completeness and accuracy of the information presented to the Audit Committee.
The External Auditors are responsible for the audit of the Corporation’s account and report to the Board of Directors and the Audit Committee as representatives of the Corporation’s shareholders. And more specifically: FINANCIAL STATEMENTS, NOTES, ANALYSIS AND PRESS RELEASES
The Committee reviews the interim consolidated financial statements, the year-end audited consolidated financial statements, the financial statements prepared for the Corporation’s subsidiaries or for filing with regulatory bodies. The Audit Committee modifies the financial statements when deemed necessary for a better understanding thereof by the Corporation’s shareholders and other interested persons. As the case may be, it recommends the approval of such financial statements by the Board of Directors.
The Committee reviews the notes to the financial statements and management reports thereon distributed to shareholders or regulatory bodies, the Management’s Discussion & Analysis and the press releases relating to the financial statements, notes and comments. The Audit Committee modifies these documents when deemed necessary for a better understanding thereof by the Corporation’s shareholders and other interested persons. As the case may be, it recommends the approval of such documents by the Board of Directors.
As a representative of the Corporation’s shareholders, the Audit Committee is responsible for the employment of the external auditors and the renewal of their mandate. The Committee reviews annually the external auditors’ mandate and states its specific expectations with regards to their services. The Committee approves the fees to be paid to the external auditors and receives the auditors’ reports together with management’s comments thereon. And more specifically, on a yearly basis:
Prior to the audit process, the Committee meets with the external auditors to determine the scope and depth of the audit plan as well as the fees allocated to execute that plan. During this meeting, the Committee reviews the external auditors’ statement of independence, the nature and extent of the other services performed by the auditors and the impact thereof on their independence.
The Audit Committee also meets with the external auditors at the meeting scheduled to examine the year–end audited consolidated financial statements at which time it receives the post-audit report, the purpose of which is to review, notably:
- The acceptability and quality of the accounting principles of the Corporation;
- The quality of the accounting systems and internal controls put in place by management to ensure that the accounting and financial information are complete and accurate;
- The external auditors’ recommendations to management regarding the financial systems and internal controls and management’s response thereto; and
- The risks containment measures put in place by the Corporation when, in the opinion of the external auditors, certain factors might have a material impact on the Corporation’s results.
During such meetings, the Audit Committee meets with the external auditors, without management and its related directors being present. In effect, the Committee can access directly the external auditors as well as the senior accountants and management of the Corporation and it holds private and informal discussions with either party, whenever it deems it appropriate to fulfill its mandate.
Likewise, the external auditors as well as the senior accountants and management of the Corporation may request, as they see fit, a meeting with the Audit Committee to review any transaction, procedure or other issue which, in their view, is within the scope of the mandate of the committee.
3. Responsibilities of the Audit Committee – Conflict of Interests
The Committee reviews annually or more often, as the case may be: Any situation which, to its knowledge, might give rise to a conflict of interest and more specifically, approves the financial conditions applicable to contracts with related persons or companies or affiliates of the Corporation to ensure that these contracts are at least as favorable to the Corporation as if they had been negotiated at arms length.
Any possible breach of contract brought to its attention which could have an impact on the financial statements.
4. Appointment of auditors – Other resources
The Committee has the authority to employ the resources required to fulfill its responsibilities. Every year, after inquiring as to the qualifications of the incumbent or proposed auditors, the Committee shall make a recommendation to the Board for the appointment of external auditors. At their first meeting of the year in March, the Committee shall consider for the coming financial year whether it is appropriate to request a proposal for services from various auditing firms or to renew the appointment of the incumbent auditors.
If management proposes that the external auditors be replaced, the Committee shall inquire as to the reasons for such a change and solicit the opinion of the current auditors thereon.
The Audit Committee shall consist of no less than three members of the Board of Directors appointed by the Board to hold office for a period of one year or such other period as determined by the Board. The majority of the members of the Committee are unrelated directors, as defined in the Toronto Stock Exchange Guidelines. All Committee members are financially literate and at least one member has accounting or related financial expertise.
“Financial literacy” means to be able to read and understand a balance sheet, an income statement and a cash flow statement prepared in accordance with the Canadian generally accepted accounting principles and to have held for at least five years a management position with financial responsibilities. “Accounting or related financial expertise” means to hold an accounting qualification granted by a professional corporation recognized by law or a financial qualification obtained from a recognized university and to be able to analyze and interpret a full set of financial statements, including the notes attached thereto, in accordance with the Canadian generally accepted accounting principles.
The chairman of the Committee is appointed by the Board of Directors and chosen among the independent directors. In case of absence or vacancy or if the chairman is unable for any other cause to fulfill his responsibilities, the Committee chooses a chairman among its members.
7. Number of meetings
The Committee meets at least four times a year at a time and place arranged by the Secretary after discussion with the Chairman and Committee members. When required, meetings may be held by conference call.
A member of the Committee may request a special meeting at any time.
The Committee appoints a Secretary. Before each meeting of the Committee, the Secretary provides its members with a written agenda. In addition, the Secretary records the minutes of each meeting.
9. Quorum and Decisions
The quorum shall consist of a majority of the Committee members. Subject to the existence of a quorum, the Committee decides by way of resolutions approved by a majority of members present.
The Committee reports to the Board of directors. A report consisting of the minutes of the Committee’s meeting is sufficient.
An “unrelated director” means a director who is independent of management and is free from any interest, other than an interest or relationship arising strictly from the fact that he/she is a shareholder, and from any other business or relationship which could materially interfere with the director’s ability to act within the best interests of the Corporation, or could reasonably be perceived to have such an effect.
Audit committee guidelines
1. Review of the Annual Financial Statements
Obtain assurance from the Chief Financial Officer with regards to:
- The accuracy and completeness of the financial information used to prepare the financial statements and more specifically the accuracy of the declared revenues
- Compliance with regulatory requirements and industry standards in the preparation of the Corporation’s financial statements
- Changes in accounting principles or in their application which could have a material impact on the financial statements
- Compliance with all loan agreements and trust deeds, as the case may be, and related financial disclosure
- Controversial accounting policies or policies relating to an emerging area for which there is no guideline
- The fulfillment of all obligations for which Directors are personally liable (such as tax remittance to the government…)
- The implementation and reliability of internal control systems. Obtain assurance from the officer in charge of operations with regards to:
- Compliance by the employees under his/her authority, with the laws and regulations of The relevant countries
- Compliance by the employees under his/her authority, of the code of ethics approved by the Board of Directors
Review the accounting treatment and financial disclosure with regards to:
- Special events or transactions which occurred during the financial year;
- Related party transactions;
- Unusual gains or losses;
- Financing requirements.
2. Due Diligence
- Review any material financial adjustment, litigation or potential liability
- Compare results with budgets or forecasts and review significant discrepancies.
- Inquire to determine whether Management or the external auditors are aware of any activities which could be illegal or unethical
- Review the Corporation’s exposure to risks or uncertainties and report to the Board
- Review of compliance with the signing resolution approved by the Board of Directors
- Review any contract with related parties or affiliates or not concluded in the normal course of business
- Review the information relating to production, sales and revenues
- Review the committee’s mandates annually and recommend to the Board of Directors necessary or required amendments
- Prepare and recommend annually to the Board a “review of the committee’s practices” to be inserted in the Annual management Proxy Circular
- Regularly review and update, at least annually, the present Chart.
- Ensure to put into place adequate procedures and see that Executive Management respects the disclosure policy regarding; i) financial information; ii) operations, activities, facts or events having a material effect upon the Corporation’s financial condition.
- Ensure that Executive Management acts in compliance with the Corporation’s disclosure policy.