This Guide summarizes certain rule changes affecting the Annual Report on Form 20-F for fiscal year 2006 to be filed by foreign private issuers on or prior to July 2, 2007 (the "2006 Annual Report"). 1

This Guide is not intended to be a cumulative review of rules applicable to foreign private issuers mandated by the Sarbanes-Oxley Act ("Sarbanes-Oxley"), the securities offering reforms that became effective on December 1, 2005, or other rules applicable to Annual Reports on Form 20-F ("Annual Reports"). We have previously distributed White & Case memoranda discussing the provisions of Sarbanes-Oxley and the securities offering reforms and changes affecting the preparation of Annual Reports covering years prior (2004, 2005) to the 2006 fiscal year.

This guide contains a brief summary of the following new disclosure requirements and other regulatory developments affecting the 2006 Annual Report:

  • Internal Control over Financial Reporting. Foreign private issuers that are large accelerated filers2 must comply with the disclosure requirements of Section 404 of Sarbanes-Oxley in the 2006 Annual Report. Foreign private issuers that are accelerated filers, but not large accelerated filers, are required to comply only with the Section 404 requirement to include management's report on internal control, and not the requirement to include an independent auditor's attestation, in the 2006 Annual Report. For non-accelerated filers, the deadline for compliance with the requirement to include management's report on internal control has been extended to fiscal years ending on or after December 15, 2007, and to fiscal years ending on or after December 15, 2008 for the independent auditor attestation requirement.
  • Section 302 Certification of Internal Control over Financial Reporting. Beginning with the 2006 Annual Report, CEOs and CFOs of accelerated filers and large accelerated filers are required to certify that they are responsible for internal controls over financial reporting and have designed a system of internal controls over financial reporting to provide reasonable assurance that the financial statements are reliable and prepared in accordance with generally accepted accounting principles. Non-accelerated filers will be subject to this Section 404 requirement beginning with their 2007 Annual Reports.
  • Executive Compensation. Recent amendments made by the Securities and Exchange Commission (the "SEC") to the disclosure rules for executive compensation and related party disclosure do not apply to foreign private issuers filing Annual Reports on Form 20-F. However, the amended rules do affect the Form 20-F exhibit requirements. Individual management contracts and compensatory plans now are required to be filed as exhibits only if the foreign private issuer is required to publicly file such documents in its home country, or has otherwise publicly disclosed such documents.
  • SEC Comments on Filings for First-Time IFRS Filers. The SEC has begun to receive and review financial statements filed by first-time adopters of International Financial Reporting Standards ("IFRS") and has issued comments on a number of filings.
  • SEC Interpretive Guidance on Management's Assessment of Internal Control. The SEC has proposed new interpretive guidance for management on assessing internal controls, proposing a "top-down," "risk-based" approach intended to enable management to scale and tailor its evaluation procedures to fit its particular facts and circumstances.3
  • NYSE Changes. The NYSE has eliminated its requirement that Annual Reports be physically distributed to shareholders. This is intended as an accommodation for foreign private issuers, which are exempt from the proxy rules under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
  • Nasdaq Changes. Nasdaq converted to a national securities exchange in 2006. Securities formerly traded on the Nasdaq National Market are now traded on either the Nasdaq Global Market or the Nasdaq Global Select Market. Companies with Nadsaq-traded securities must indicate on the cover page of their Annual Reports that those securities are registered under Section 12(b) of the Exchange Act, rather than under Section 12(g).

Internal Control over Financial Reporting

Section 404 of Sarbanes-Oxley requires that the SEC prescribe rules requiring each registrant's Annual Report to contain an internal control report stating the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting, and containing an assessment of the effectiveness of the internal control structure and procedures of the registrant for financial reporting. In addition, Section 404(b) requires the inclusion of a related attestation from the registrant's independent auditors.

The 2006 Annual Report is the first Annual Report in which foreign private issuers that are large accelerated filers must comply with the disclosure requirements of Section 404. Foreign private issuers that are accelerated filers, but not large accelerated filers, will be required to include only management's report on internal control in the 2006 Annual Report, and not the Section 404(b) requirement to provide an independent auditor's attestation report.

The SEC extended the deadline for meeting the Section 404(b) requirement in an August 9, 2006 release, requiring foreign private issuers that are accelerated filers, but not large accelerated filers, to include the independent auditor's attestation in Annual Reports for fiscal years ending on or after July 15, 2007.4 In addition, on December 15, 2006, the SEC further extended the date by which non-accelerated filers must comply with the disclosure requirements of Section 404 with respect to management's report on internal control to Annual Reports for fiscal years ending on or after December 15, 2007,5 and with respect to the Section 404(b) requirement to provide an independent auditor's attestation, to the Annual Reports for fiscal years ending on or after December 15, 2008.6 To reflect these transitions, the SEC adopted a revised Item 15 to Form 20-F, applicable to foreign private issuers that are large accelerated filers, and a temporary Item 15T, applicable to foreign private issuers that are accelerated filers, but not large accelerated filers.