Chemours Co

Disclosure Controls and Procedures

As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, we determined that certain material weaknesses in our internal control over financial reporting existed as of December 31, 2023. These material weaknesses and remediation status as of September 30, 2024 are described below.

We maintain disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission ("SEC"). These controls and procedures also provide reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), to allow timely decisions regarding required disclosures.

As of September 30, 2024, our CEO and CFO, together with management, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, due to the material weaknesses in internal control over financial reporting described below, the CEO and CFO have concluded that these disclosure controls and procedures were not effective as of September 30, 2024.

Notwithstanding the material weaknesses, our CEO and CFO have concluded that the Company’s unaudited interim consolidated financial statements included in this Quarterly Report are fairly stated in all material respects in accordance with U.S. generally accepted accounting principles for each of the periods presented.

Material Weaknesses in Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses had been identified as of December 31, 2023:

We did not design and maintain an effective control environment as senior management failed to set an appropriate tone at the top. Specifically, among other things, there was a lack of transparency with the Company’s board of directors by former senior management regarding efforts to delay payments to certain vendors and to accelerate the collection of receivables, and that these individuals engaged in these efforts in part to meet free cash flow targets that the Company had communicated publicly, and which also would be a part of a key metric for determining incentive compensation applicable to both executive officers and to employees. As a result, it was concluded that former senior management violated the Company’s “Code of Ethics applicable to the Chief Executive Officer, the Chief Financial Officer, and the Controller.” The ineffective control environment contributed to the following additional material weaknesses:

We did not design and maintain effective controls related to the information and communication component of the COSO Framework, and principles of internally communicating information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control. Specifically, the Company did not design and maintain effective controls to ensure appropriate communication between certain functions within the Company, including (i) the identification and communication of certain contractual arrangements and (ii) communication of business developments which impact key assumptions used in the goodwill impairment assessment. This material weakness related to information and communication contributed to an additional material weakness in that we did not design and maintain effective controls regarding the evaluation and escalation of reports made through the Chemours Ethics Hotline, including controls regarding the escalation of certain reports to the General Counsel and Chair of the Audit Committee.

Additionally, we did not design and maintain effective controls to prevent or timely detect unauthorized changes to our vendor master files in order to prevent unauthorized cash disbursements.

These material weaknesses did not result in any material misstatements of the Company’s financial statements or disclosures but did result in immaterial revisions to our March 31, 2023, June 30, 2023 and September 30, 2023 financial statements and a revision to the Company’s Balance Sheet as of December 31, 2022 and the Company’s Statement of Cash Flows for each of the years ended December 31, 2022 and 2021. Additionally, the material weaknesses described above could lead to a misstatement of substantially all account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

Remediation of Previously Identified Material Weaknesses

Management previously disclosed in our 2023 Annual Report and our Quarterly Reports in 2024 the following control deficiencies that constituted material weaknesses in our internal control over financial reporting:

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We did not design and maintain effective controls regarding the evaluation and escalation of reports made through the Chemours Ethics Hotline, including controls regarding the escalation of certain reports to the General Counsel and Chair of the Audit Committee.

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We did not design and maintain effective controls to prevent or timely detect unauthorized changes to our vendor master files in order to prevent unauthorized cash disbursements.

We have established a Project Management Office (“PMO”) to monitor progress towards remediation and have also engaged external legal, accounting, financial and other consulting, and professional services firms to assist senior management in the development and execution of a comprehensive remediation program. Management developed a comprehensive workplan for remediation of the material weaknesses. This workplan included the following:

Ethics and Compliance Reporting

With respect to maintaining effective controls regarding the evaluation and escalation of reports made through the Chemours Ethics Hotline, including controls regarding the escalation of certain reports to the General Counsel and Chair of the Audit Committee, the Company has reassessed and redesigned certain elements of its processes and procedures. The Company retained the services of an external firm to assist the Company in its efforts in the design, implementation, and interim supervision of the ethics and compliance aspects of the remediation program, as well as supporting the day-to day operations of the Ethics & Compliance function, as a result of the retirement of the Company’s former Chief Ethics & Compliance Officer. The Company hired its new Chief Compliance and Enterprise Risk Management Officer effective September 16, 2024.

The Company has modified its policies, processes, and procedures with respect to managing, investigating, and closing ethics complaints, including establishing processes for the escalation of matters involving Section 16 Officers to the General Counsel and Audit Committee Chair. Additionally, if a complaint implicates the General Counsel, the Chief Audit Executive and the Chair of the Audit Committee will be notified. The Company’s Investigations Policy outlines the key principles to be applied including objectivity, thoroughness, professionalism, confidentiality and timeliness, and the accompanying Ethics Hotline Investigations Procedures outlines expectations for each step of the investigation process including roles and responsibilities, case intake, investigation planning and execution, and final resolution, documentation, and communication to relevant stakeholders. Additionally, the Company has provided training on the Investigations Policy and Ethics Hotline Investigations Procedures to those who conduct investigations.

The Company published both internally and externally a new Speak Up Policy, which reinforced every employee’s responsibility to raise concerns and outlines the numerous avenues available to report potential issues. Additionally, the Company provided mandatory training on the new Speak Up Policy to all employees worldwide.

Through these efforts, the Company implemented its plan to remediate the previously identified material weakness related to the evaluation and escalation of reports made through the Chemours Ethics Hotline.

Vendor Master Files

With respect to designing and maintaining effective controls related to preventing or detecting unauthorized changes to our vendor master files, the Company has completed its enhancements of our policies, procedures, workflows, and training as it relates to the controls over verification of vendor master file changes with vendor contacts to prevent unauthorized cash disbursements. Specifically, the Company has enhanced its controls and workflow as it relates to the verification of vendor master file bank account changes with vendor contacts.

Through the efforts described above, the Company was able to implement its plan to remediate the previously identified material weakness related to its vendor master file bank account changes.

As of September 30, 2024, the remediation measures described above have been implemented and we have had sufficient time to test the operating effectiveness and remediate the two material weaknesses noted above and, as such, the material weaknesses identified in the Company’s internal control over financial reporting related to Ethics and Compliance Reporting and Vendor Master files have been remediated.

Status of Remediation Efforts for the Unremediated Material Weaknesses

With respect to the material weaknesses related to the failure to set an appropriate tone at the top and failure to design and maintain effective controls related to the information and communication component of the COSO Framework, the Company has made the following enhancements to our internal control over financial reporting:

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On February 28, 2024, our board of directors placed former President and Chief Executive Officer, former Senior Vice President and Chief Financial Officer and Vice President, Controller and Principal Accounting Officer on administrative leave pending completion of the Audit Committee Internal Review;

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On February 28, 2024, our board of directors appointed Denise Dignam as Interim Chief Executive Officer and Matthew Abbott as Interim Chief Financial Officer (principal financial and accounting officer), and subsequently appointed Denise Dignam as President and Chief Executive Officer on March 22, 2024. On June 5, 2024, the Company announced it had appointed Shane Hostetter as Chief Financial Officer (principal financial and accounting officer), effective July 1, 2024. On July 25, 2024, the Company announced it had appointed David Will as Chief Accounting Officer and Controller (principal accounting officer), effective August 12, 2024;

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Senior leadership has held multiple "All Hands" meetings in 2024 with employees, including holding Global Town Halls immediately following the issuance of the Company's 2023 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Additionally, senior leadership has disseminated company-wide and team-specific communications to explain the material weaknesses, extract key learnings for leaders, and emphasize our commitment to our core values, specifically Integrity;

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The Compensation Committee has revised key metrics used in the determination of executive and employees' incentive compensation starting in 2024;

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Provided updated training on internal control over financial reporting and requirements under the Sarbanes-Oxley Act of 2002, including training courses on applicable federal securities laws for senior management, and training courses on ethics for finance professionals;

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Reinforced the Company’s expectation of ethical business practices via the annual, company-wide Ethics & Compliance training to educate executives and employees on our Code of Conduct, certify compliance, and outline the specific behaviors expected to fulfill our Integrity core value;

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Enhanced our internal management representation letter process which serves as a mechanism for internal information sharing and supports, in part, our CEO’s and CFO’s certifications and accuracy of our financial statements. The Company has also provided mandatory training to respondents to facilitate the receipt of complete and accurate information;

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Enhanced our Disclosure Committee process;

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Enhanced our policies and protocols related to working capital management practices, including enhancing our communication of working capital management practices to our board of directors;

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Enhanced our process around the verification of physical assets including enhancing communication of changes in the existence, operating status or impairment assessment of physical assets;

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Completed a company-wide Ethics & Compliance survey to inform our continued efforts in advancing our culture of ethics and compliance;

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Executed a refresh of our corporate values and continued to disseminate company-wide and team-specific communications to emphasize our commitment to our core values, specifically Integrity; and

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Provided updated training for certain accounting, finance, and legal employees to ensure that relevant information is appropriately communicated to personnel involved in the preparation of our consolidated financial statements or related disclosures.

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In addition to the above completed actions, we are in the process of designing and implementing the following enhancements to our internal control over financial reporting:

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Executing the recommendations of the Audit Committee’s independent outside counsel related to Tone at the Top and Information and Communication as adopted and approved by the Audit Committee and the Board of Directors;

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Enhancing our controls, policies, procedures, and training as it relates to timely and accurate communication and information sharing, including enhancing key controls concerning information communicated and used in determining the accounting for significant transactions, contracting, and business developments which impact key assumptions used in the goodwill impairment assessment;

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Providing additional training for employees and members of management, specifically in accounting, finance, and legal, to ensure that relevant information is appropriately communicated to personnel involved in the preparation of our consolidated financial statements or related disclosures; and

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Conducting additional training for employees regarding the importance of the Company establishing and maintaining effective internal control over financial reporting and disclosure controls and procedures, for information to be appropriately communicated to all relevant personnel involved in the preparation of our financial statements and disclosures.

Changes to internal control over financial reporting require operation for a sufficient period of time in order for management to evaluate and test the operating effectiveness of the internal controls over financial reporting. Management will continue to monitor and evaluate the effectiveness of these changes for a sufficient period of time prior to concluding that these controls are designed and operating effectively, and the material weaknesses can be considered remediated. The Company’s internal audit function is assessing and implementing procedures to monitor these updated processes.

As we continue to evaluate and work to improve our internal control over financial reporting and disclosure controls and procedures, we may decide to take additional measures to address control deficiencies or modify the remediation actions described above. We anticipate that the foregoing efforts and enhanced internal control over financial reporting, when implemented and tested for a sufficient period of time, will remediate the material weaknesses as described above.

Changes in Internal Control over Financial Reporting

Other than as described above, there have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.