EFXT 40-F
Enerflex Ltd. (EFXT)
REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 |
ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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(Name of exchange on which registered) |
Annual information form |
Audited annual financial statements |
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
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Enhancing regional resources to support remediation of control activities and improve documentary evidence protocols at the control execution level; |
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Engaging additional experienced third-party advisors on various compliance initiatives, including monitoring of control remediation; |
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Improving the design of existing controls and supporting policies by enhancing process documentation and refining precision levels in policies and procedures to facilitate the detection and prevention of errors that have the potential to aggregate to a material amount; |
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Training control owners to support compliance efforts with existing and enhanced policies that establish steps and procedures required to be performed in executing and documenting internal controls, particularly in relation to information used in controls; |
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Engaging individuals with project management expertise to ensure execution of the steps and procedures required to be performed in executing and documenting internal controls, in line with a project plan, a timeline and enhanced resources to evaluate the operating effectiveness of internal controls; |
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Establishing a cross-regional project management committee to improve information flow; and |
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Increasing the frequency of engagement between the internal controls and procedures implementation team, senior management, Enerflex’s external auditor and the Audit Committee to review progress on remediation activities. |
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Management regularly reviews its system of internal control over financial reporting and makes changes to the Company’s processes and systems to improve controls and increase efficiency including, but not limited to, the changes set forth above under the heading “Disclosure Controls and Procedures – Remediation Plan and Activities”, with a view to ensuring that the Company maintains an effective internal control environment.
Other than is disclosed herein, there have been no significant changes in the design of the Company’s internal controls over financial reporting (“ICFR”) during the twelve months ended December 31, 2023, that would materially affect, or is reasonably likely to materially affect, the Company’s ICFR.
NOTICES PURSUANT TO REGULATION BTR
The Company did not send any notices required by Rule 104 of Regulation BTR during the year ended December 31, 2023, concerning any equity security subject to a blackout period under Rule 101 of Regulation BTR.
IDENTIFICATION OF THE AUDIT COMMITTEE
The Company has a separately designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act. The Audit Committee is composed of Mona Hale (Chair), Joanne Cox, James Gouin, and Michael A. Weill, as described under “Audit Committee - Composition of the Audit Committee” in the AIF.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that the Company has at least one “audit committee financial expert” (as defined in paragraph (8) of General Instruction B to Form 40-F) and that Ms. Hale and Mr. Gouin are the Company’s “audit committee financial experts” serving on the Audit Committee of the Board. The audit committee financial experts are “independent” under applicable listing standards.
CODE OF ETHICS
The Company has a “code of ethics” (as defined in paragraph (9)(b) of General Instruction B to Form 40-F) that applies to all the Company’s employees, officers and directors, including the Chief Executive Officer, Interim Chief Financial Officer, principal accounting officer or controller, and persons performing similar functions. During the fiscal year ended December 31, 2023, the Registrant amended its code of ethics (referred to as the “Business Code of Conduct”) to communicate its anti-money laundering and sanctions policies.
The Company’s Business Code of Conduct, as amended, is filed as Exhibit 99.9 to this annual report on Form 40-F, and is available without charge on the Company’s website at www.enerflex.com or upon request from the Corporate Secretary, Enerflex Ltd., Suite 904, 1331 Macleod Trail S.E., Calgary, Alberta, Canada, T2G 0K3 (telephone (403) 261-4280).
During the fiscal year ended December 31, 2023, there have not been any waivers of, including implicit waivers of, any provision of the Business Code of Conduct which is applicable to the Company’s Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of the code of ethics definition enumerated in paragraph (9)(b) of General Instruction B to Form 40-F.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Ernst & Young LLP (PCAOB ID: 1263) served as the Company’s independent public accountant for the fiscal years ended December 31, 2023 and 2022.
For the years ended December 31, 2023 and 2022, Ernst & Young LLP and its affiliates billed or expect to bill, including out-of-pocket costs, $8,025,285 and $5,761,108, respectively, as detailed below:
| 2023 | 2022 | |||||||
| Audit Fees (1) |
$ | 7,223,381 | $ | 5,138,841 | ||||
| Audit-related Fees (2) |
$ | 340,035 | $ | 177,924 | ||||
| Tax Fees (3) |
$ | 461,869 | $ | 444,343 | ||||
| All Other Fees (4) |
$ | — | $ | — | ||||
| Total |
$ | 8,025,285 | $ | 5,761,108 | ||||
Notes:
| (1) | “Audit Fees” include fees necessary to perform the annual audit and quarterly reviews of the Company’s consolidated financial statements. Audit Fees include fees for accounting consultations on matters reflected in the financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits. |
| (2) | “Audit-related Fees” include services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews, and audit, or attest services not required by legislation or regulation. |
| (3) | “Tax Fees” include fees for all tax services other than those included in “Audit Fees” and “Audit-related Fees”. This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities and guidance to employees transferred internationally. |
| (4) | “All Other Fees” include all other non-audit services. |
| (5) | While the professional fees in the preceding table represent the amounts billed or expected to be billed, the Company’s AIF details the total professional fees paid to Ernst & Young LLP during the year. |
| (6) | All amounts are in Canadian dollars unless otherwise stated. |
| (7) | No other firms provided audit services in 2023 or 2022. |
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
For a description of the pre-approval policies and procedures of the Company’s Audit Committee, see “Audit Committee—Pre-approval Policies and Procedures” in the AIF.
No audit-related fees, tax fees or other non-audit fees were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has not entered into any “off-balance sheet arrangements”, as defined in General Instruction B(11) to Form 40-F, that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
For tabular disclosure of the Company’s contractual obligations, see the Annual MD&A, under the heading “Contractual Obligations, Committed Capital Investment, and Off-Balance Sheet Arrangements”.
COMPARISON OF NYSE CORPORATE GOVERNANCE RULES
The Company is subject to a variety of corporate governance guidelines and requirements enacted by the Toronto Stock Exchange (the “TSX”), the Canadian securities regulatory authorities, the New York Stock Exchange (the “NYSE”) and the U.S. Securities Exchange Commission (“SEC”). The Company’s common shares are listed on the TSX and the NYSE. Sections 103.00 and 303A.11 of the NYSE Listed Company Manual permit “foreign private issuers” (as defined in Rule 3b-4 under the Exchange Act) like the Company to follow home country practices in lieu of certain provisions of the NYSE Listed Company Manual. A description of the significant ways in which the Company’s corporate governance practices differ from those followed by domestic companies pursuant to NYSE standards is as follows:
Shareholder Meeting Quorum Requirement: The NYSE is of the opinion that the quorum required for any meeting of shareholders should be sufficiently high to ensure a representative vote. The Company’s quorum requirement is set forth in its By-laws. A quorum for a meeting of the Company’s shareholders is (a) two persons present in person, each holding or representing by proxy at least one issued share of Enerflex, for the choice of a chair of the meeting and for the adjournment of the meeting to a fixed time and place and (b) for all other purposes, two persons present and holding or representing by proxy not less than 10% of the total number of Enerflex common shares entitled to be voted at the meeting.
Shareholder Approval Requirement: The NYSE rules for U.S. domestic issuers require shareholder approval of certain transactions or series of related transactions that result in the issuance of common shares, or securities convertible into or exercisable for common shares, that have, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding prior to the transaction or if the issuance of common shares, or securities convertible into or exercisable for common shares, are, or will be upon issuance, equal to or in excess of 20% of the number of common shares outstanding prior to the transaction.
The Company intends to follow TSX rules for shareholder approval of new issuances of its common shares. In accordance with TSX rules, shareholder approval is required for certain issuances of shares that: (i) materially affect control of the Company; or (ii) provide consideration to insiders in an aggregate of 10% or greater of the market capitalization of the Company and have not been negotiated at arm’s length. Shareholder approval is also required under TSX rules in the case of private placements: (a) for an aggregate number of listed securities issuable greater than 25% of the number of securities of the listed issuer which are outstanding, on a non-diluted basis, prior to the date of closing of the transaction if the price per security is less than the market price; or (b) that during any six-month period are to insiders for listed securities or options, rights or other entitlements to listed securities greater than 10% of the number of securities of the listed issuer which are outstanding, on a non-diluted basis, prior to the date of the closing of the first private placement to an insider during the six-month period.
Equity Compensation Plans: The NYSE rules for U.S. domestic issuers require shareholder approval of all equity compensation plans (as defined in the NYSE rules) regardless of whether new issuances, treasury shares or shares that the Company has purchased in the open market are used. Unlike the NYSE rules, there is no requirement in Canada for shareholder approval of compensation arrangements settled solely in cash or with shares purchased in the open market at fair value or for amendments to such arrangements. Enerflex intends to comply with the TSX rules that require a listed company to obtain shareholder approval of any share compensation arrangement that involves the issuance of shares from treasury or to make amendments to such arrangements that require shareholder approval (in accordance with the TSX rules and the terms of such arrangement).
The foregoing is consistent with Canadian laws, customs and practices.
RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
The Company’s Incentive Compensation Recovery Policy is filed as Exhibit 97 to this annual report on Form 40-F.
UNDERTAKING
The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the SEC staff, and to furnish promptly, when requested to do so by the SEC staff, information relating to: the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.
DISCLOSURE PURSUANT TO SECTION 13(r) OF THE EXCHANGE ACT
In accordance with Section 13(r) of the Exchange Act, the Company is required to include certain disclosures in its periodic reports if it or any of its affiliates knowingly engaged in certain specified activities during the period covered by the report. Neither the Company nor its affiliates have knowingly engaged in any transaction or dealing reportable under Section 13(r) of the Exchange Act during the year ended December 31, 2023.
EXHIBIT INDEX
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Company certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.
ENERFLEX LTD.
/s/ Marc E. Rossiter
Marc E. Rossiter
President and Chief Executive Officer
Date: February 28, 2024