1. PURPOSE OF THIS POLICY
The purpose of this policy is to establish procedures for:
- a. the receipt, retention, and treatment of complaints received by Flora Growth Corporation (the “Corporation”) regarding (i) accounting, internal accounting controls, and auditing matters; or (ii) violations of the Corporation’s policies including the Code of Business Conduct and Ethics, the Anti-Bribery and Anti-Corruption Policy, the Policy on Insider Trading and Disclosure and the Special Trading Procedures for Insiders; and
- b. the submission by employees of the Corporation, on a confidential and anonymous basis, of concerns regarding questionable accounting, auditing matters or violations to any of the Corporation’s policies (as described above).
The purpose of this policy is also to state clearly and unequivocally that the Corporation prohibits discrimination, harassment and/or retaliation against any employee, director or officer who reports complaints to the Audit Committee regarding accounting, internal controls, auditing matters or violations of the Code of Business Conduct and Ethics. Everyone at the Corporation is responsible for ensuring that the workplace is free from all forms of discrimination, harassment and retaliation prohibited by this policy. No employee, director or officer of the Corporation has the authority to engage in any conduct prohibited by this policy.
This policy protects any employee who in good faith submits any complaint to the Audit Committee regarding financial statements disclosures, accounting, internal accounting controls, auditing matters or violations to the Corporation’s Code of Business Conduct and Ethics in accordance with the procedures set out herein.
If an employee, director or officer legitimately and in good faith engages in any of the activities listed above, the Corporation will not discharge, demote, suspend, threaten, harass or otherwise discriminate or retaliate against him or her in the terms or conditions of employment because of that activity. However, since such allegation of impropriety may result in serious personal repercussions for the target person or entity, the employee, director or officer making the allegation of impropriety should have reasonable and probable grounds before reporting such impropriety and should undertake such reporting in good faith, for the best interests of the Corporation and not for personal gain or motivation.
2. COMPLAINT PROCEDURES
- a. Any employee, director, or officer who legitimately and in good faith believes that he or she may have been the subject of prohibited discrimination, harassment and/or retaliation or is aware of any conduct that may be prohibited by this policy is strongly encouraged to report such belief to the Chief Executive Officer who will immediately forward the report to one or more members of the Corporation’s Audit Committee. Any employee, director or officer who receives such a complaint or witnesses any conduct that he or she legitimately and in good faith believes may be prohibited by this policy must immediately notify his or her supervisor and/or the Chief Executive Officer of the Corporation. Such concerns and/or complaints may be communicated anonymously if desired.
- b. Upon receiving a complaint, the Audit Committee will promptly conduct a thorough investigation. The Audit Committee shall notify the Board of Directors and the Chief Executive Officer of such investigations. It is the obligation of all employees, directors, and officers to cooperate in such investigation. Those responsible for the investigation will maintain the confidentiality of the allegations of the complaint and the identity of the persons involved, subject to the need to conduct a full and impartial investigation, remedy any violations of the Corporation’s policies, or monitor compliance with or administer the Corporation’s policies.
- c. The investigation will generally include, but will not be limited to, discussion with the complainant (unless the complaint was submitted on an anonymous basis), the party against whom allegations have been made, and witnesses, as deemed appropriate.
- d. In the event an investigation establishes that an employee, director or officer has engaged in conduct or actions constituting discrimination, harassment and/or retaliation in violation of this policy, the Corporation will take immediate and appropriate corrective action up to and including termination of an employee’s employment.
- e. In the event that the investigation reveals that the complaint was frivolously made, or undertaken for improper motives, made in bad faith or without a reasonable and probable basis, that complainant’s supervisor will take whatever disciplinary action may be appropriate in the circumstances.
3. AUDIT COMMITTEE PROCEDURES
The Audit Committee has adopted the following procedures:
- a. Management of the Corporation shall promptly forward to the Audit Committee any complaints that it has received regarding financial statement disclosures, accounting, internal accounting controls or auditing matters.
- b. Any employee of the Corporation may submit, on a confidential or anonymous basis if the employee so desires, any concerns regarding financial statement disclosures, accounting, internal accounting controls, auditing matters or
- violations of the Corporation’s Code of Business Conduct and Ethics. All such concerns shall be set forth in writing and forwarded in a sealed envelope to the Chairman of the Audit Committee labeled with a legend such as “To be opened by the Audit Committee only, being submitted pursuant to the Whistleblower Policy adopted by the Corporation.” If an employee would like to discuss any matter with the Audit Committee, the employee should indicate this in the submission and include a telephone number at which he or she might be contacted if the Audit Committee deems it appropriate. If management receives any such envelope, it shall be forwarded promptly and unopened to the Chairman of the Audit Committee. The Chairman of the Audit Committee can be reached as follows: PRIVATE AND CONFIDENTIAL Attn: Chairman of the Audit Committee Flora Growth Corporation 365 Bay Street, Suite 00 Toronto, Ontario, M5H 2V1
- c. Following the receipt of any complaints submitted hereunder, the Audit Committee will investigate each matter so reported and take corrective and disciplinary actions where appropriate, which may include, alone or in combination, a warning or letter of reprimand, demotion, loss of merit increase, bonus or stock options, suspension without pay or termination of employment. The Audit Committee shall notify the Board of Directors and the Chief Executive Officer of such investigations.
- d. During investigations, the Audit Committee shall endeavor to act in a prudent and reasonable manner, with minimal disruption to the business and affairs of the Corporation and with sensitivity to the personal circumstances of the individual being investigated.
- e. In circumstances of impropriety alleged against the Board of Directors, as a whole or any member thereof, the Chief Executive Officer shall be responsible to investigate such allegations and the Chief Executive Officer shall report his or her findings to the Board of Directors.
- f. The Audit Committee may enlist employees of the Corporation and/or outside legal, accounting or other advisors, as appropriate, to conduct any investigation of complaints regarding financial statement disclosures, accounting, internal accounting controls, auditing matters or violations of the Corporation’s Code of Business Conduct and Ethics. In conducting any investigation, the Audit Committee shall use reasonable efforts to protect the confidentiality and anonymity of the complainant.
- g. The Audit Committee shall retain as a part of the records of the Audit Committee any such complaints or concerns for a period of no less than six (6) years.
- h. The Audit Committee will review and evaluate this Policy on an annual basis to determine whether the Policy is effective in providing appropriate procedures to report violations or complaints regarding Accounting Standards or the Code of Business Conduct & Ethics. The Audit Committee will submit recommended changes to the Board for Approval.
The Company strives to ensure that the contents of and the disclosures in the reports and documents that the Company files with the SEC and other public communications shall be full, fair, accurate, timely and understandable in accordance with applicable disclosure standards, including standards of materiality, where appropriate. Each person subject to this Code must:
- • not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s independent registered public accountants, governmental regulators, self-regulating organizations and other governmental officials, as appropriate; and
- • in relation to his or her area of responsibility, properly review and critically analyze proposed disclosure for accuracy and completeness.
In addition to the foregoing, the Chief Executive Officer and Chief Financial Officer of the Company and each subsidiary of the Company (or persons performing similar functions), if any, and each other person that typically is involved in the financial reporting of the Company, must familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company.
Each person subject to this Code must promptly bring to the attention of the Board any information he or she may have concerning (a) significant deficiencies in the design or operation of internal and/or disclosure controls that could adversely affect the Company’s ability to record, process, summarize and report financial data or (b) any fraud that involves management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls.
It is the Company’s obligation and policy to comply with all applicable governmental laws, rules and regulations. All directors, officers and employees of the Company are expected to understand, respect and comply with all of the laws, regulations, policies and procedures that apply to them in their positions with the Company. Employees are responsible for talking to their supervisors to determine which laws, regulations and Company policies apply to their position and what training is necessary to understand and comply with them.
Directors, officers and employees are directed to specific policies and procedures available to persons they supervise.
6. Reporting and Accountability
The Board is responsible for applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular situation. Any
person who becomes aware of any existing or potential breach of this Code is required to notify the Board promptly. Failure to do so is, in and of itself, a breach of this Code.
Specifically, each person subject to this Code must:
- • Notify the Board promptly of any existing or potential violation of this Code.
- • Not retaliate against any other person for reports of potential violations that are made in good faith.
The Company will follow the following procedures in investigating and enforcing this Code and in reporting on this Code:
- • The Board will take all appropriate action to investigate any breaches reported to it.
- • Upon determination by the Board that a breach has occurred, the Board (by majority decision) will take or authorize such disciplinary or preventive action as it deems appropriate, after consultation with the Company’s internal or external legal counsel, up to and including dismissal or, in the event of criminal or other serious violations of law, notification to the SEC or other appropriate law enforcement authorities.
No person following the above procedure shall, as a result of following such procedure, be subject by the Company or any officer or employee thereof to discharge, demotion, suspension, threat, harassment or, in any manner, discrimination against such person in terms and conditions of employment.
7. Waivers and Amendments
Any waiver (defined below) or implicit waiver (defined below) from a provision of this Code for any director, or the principal executive officer, principal financial officer, principal accounting officer or controller of the Company, or persons performing similar functions, and any amendment (defined below) of this Code, must be approved by the Board and must be disclosed through a press release or in a report on Form 6-K or in the Company’s next report on Form 20-F or Form 40-F, or on the Company’s website, as required by applicable laws, rules and regulations and in the manner required thereby.
A “waiver” means the approval by the Board of a material departure from a provision of this Code. An “implicit waiver” means the Company’s failure to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to an executive officer of the Company. An “amendment” means any amendment to this Code other than minor technical, administrative or other non-substantive amendments hereto.
Any request for a waiver of any provision of this Code must be in writing and addressed to the Board. All persons subject to this Code should note that it is not the Company’s intention to grant or permit waivers from the requirements of this Code. The Company expects full compliance with this Code.
8. Insider Information and Securities Trading
The Company’s directors, officers and employees who have access to material, non-public information are not permitted to use that information for security trading purposes or for any purpose unrelated to the Company’s business. It is also against the law to trade or to “tip” others who might make an investment decision based on inside company information. For example, using non-public information to buy or sell Company securities, options in Company securities or the securities of any Company supplier, customer, competitor or potential target is prohibited. The consequences of insider trading violations can be severe. These rules also apply to the use of material, non-public information about other companies (including, for example, the Company’s customers, competitors, potential business partners and potential targets). In addition to directors, officers and employees, these rules apply to each such person’s spouse, children, parents and siblings, as well as any other family members living in such person’s home.
9. Financial Statements and Other Records
All of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions and must both conform to applicable legal requirements and to the Company’s system of internal controls. Unrecorded or “off the books” funds or assets should not be maintained unless permitted by applicable law or regulation.
Records should always be retained or destroyed according to the Company’s record retention policies. In accordance with those policies, in the event of litigation or governmental investigation, please consult the Board or the Company’s internal or external legal counsel.
10. Improper Influence on Conduct of Audits
No director or officer, or any other person acting under the direction thereof, shall directly or indirectly take any action to coerce, manipulate, mislead or fraudulently influence any public or certified public accountant engaged in the performance of an audit or review of the financial statements of the Company or take any action that such person knows or should know that if successful could result in rendering the Company’s financial statements materially misleading. Any person who believes such improper influence is being exerted should report such action to such person’s supervisor, or if that is impractical under the circumstances, to any of the Company’s directors.
Types of conduct that could constitute improper influence include, but are not limited to, directly or indirectly:
- • Offering or paying bribes or other financial incentives, including future employment or contracts for non-audit services;
- • Providing an auditor with an inaccurate or misleading legal analysis;
- • Threatening to cancel or canceling existing non-audit or audit engagements if the auditor objects to the Company’s accounting;
- • Seeking to have a partner removed from the audit engagement because the partner objects to the Company’s accounting;
- • Blackmailing; and
- • Making physical threats.
11. Anti-Corruption Laws
The Company complies with the anti-corruption laws of the countries in which it does business, including the Corruption of Foreign Public Officials Act (Canada) (“CFPOA”) and the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”). Directors, officers, employees and agents, such as third-party sales representatives, shall not take or cause to be taken any action that would reasonably result in the Company not complying with such anti-corruption laws, including the CFPOA and FCPA. If you are authorized to engage agents on the Company’s behalf, you are responsible for ensuring they are reputable and for obtaining a written agreement for them to uphold the Company’s standards in this area.
The Board will investigate any reported violations and will oversee an appropriate response, including corrective action and preventative measures. Any director, officer or employee who violates this Code will face appropriate, case specific disciplinary action, which may include demotion or discharge. Such action is in addition to any civil or criminal liability which might be imposed by any court or regulatory agency.
13. Other Policies and Procedures
Any other policy or procedure set out by the Company in writing or made generally known to employees, officers or directors of the Company prior to the date hereof or hereafter are separate requirements and remain in full force and effect.
All inquiries and questions in relation to this Code or its applicability to particular people or situations should be addressed to the Board, or such other compliance officer as shall be designated from time to time by the Board.