IDENTIFICATION OF RELATED PARTIES & POTENTIAL RELATED PARTY TRANSACTIONS
The Company Secretary shall at all times maintain a database of Company’s Related Parties containing the names of individuals and entities, identified on the basis of the definition of Related Party and declaration provided by the Directors, along with their personal/entity details including any revisions therein based on declaration / information received from directors, shareholders, other sources etc, and the same shall be duly shared with functional team at regular intervals..
The list of Related Party shall be updated whenever necessary and reviewed on a timely basis and would be communicated to the functional departments. Each Director and Key Managerial Personnel is responsible for providing declaration to the Company Secretary of Related Party involving him or her or his or her Relative, including any additional information that the Company Secretary may reasonably request. The functional departments shall submit to the head of Finance & Accounts and the Company Secretary, the details of proposed transaction (except those for which omnibus approval has been granted by the Audit Committee as explained subsequently) with draft agreement or other supporting documents justifying that the transactions are on arm’s length basis at prevailing market rate. Based on such information, the Company Secretary will facilitate for the necessary approval from the Audit Committee.
Broad Parameters to assess:
Ordinary Course of Business
The phrase “Ordinary Course of Business” is not defined under the Act or Rules made there under. The Company shall adopt a reasonable approach / methodology to demonstrate ‘Ordinary Course of Business’ which shall, inter alia, include the nature of the transaction, the frequency / regularity / length of time the company is engaged such transaction, such transaction / action is consistent with the past practices and was taken in the ordinary course of the normal day-to-day operations of such company, common commercial practice, i.e. customarily taken, in the ordinary course of the normal day-to-day operations of other companies that are in the same / similar line of business.
Arm’s Length
For transactions between two related parties to be considered to be at arm’s length pricing, the transaction should be conducted between the two parties as if the parties were unrelated, so that there is no conflict of interest. i.e. arm’s length pricing is the condition or the fact that the two related parties transact as independent (un-related) parties and on an equal footing from one or more of the following aspects viz. nature of goods / services, risk assumed, assets / resources employed, key terms / covenants. In the absence of any guidelines on Arm’s Length Pricing in the Act, the Company shall adopt reasonable approach / methodology to demonstrate Arm’s Length Pricing for the specified RPT identified, which shall, inter alia, shall include, the nature of the transaction, description of functions to be performed, risks to be assumed and assets to be employed, key terms / special terms in the arrangement forming part of a composite transaction.
APPROVAL OF RELATED PARTY TRANSACTION
The approval policy framework is given below:
Approval of Audit Committee
- All RPT or any subsequent modifications to RPT of the Company with Related Parties shall require approval of the Audit Committee. The Audit Committee may grant omnibus approval for the related party transaction which are repetitive in nature and are in the ordinary course of business and are at arm’s length, subject to compliance of the conditions set forth under the Act read with the rules made thereunder and other applicable law. The Audit Committee shall satisfy itself of the need for the omnibus approval and that same is in the interest of the Company.
- Any member of the Audit Committee who has a potential interest in any RPT will abstain from discussion and voting on the approval of the RPT.
- The Audit Committee shall review on half yearly basis, the details of RPTs entered into by the Company pursuant to each of the omnibus approval
Prior approval of Board of Directors
- All transactions with related parties which are either not in the ordinary course of business or are not at Arm’s Length shall require prior approval of the Board of Directors, in terms of Section 188 of the Act.
- In the above context, where any Director is interested in any contract or arrangement with a Related Party, such Director shall not be present during the discussions and vote on the subject matter of the resolution relating to such contract or arrangement.
Prior approval of Shareholders
- Transaction with related parties which are either not in the ordinary course of business or not on ‘arm’s length basis and exceeds the threshold under section 188 of the Act shall require prior approval of the shareholders through an ordinary resolution.
GENERAL CRITERIA FOR APPROVAL OF RELATED PARTY TRANSACTIONS:
To review a Related Party Transaction, the Audit Committee is provided with all relevant material information of the Related Party Transaction, including the terms of the transaction, the business purpose of the transaction, the benefits to the Company and to the Related Party, and any other relevant matters.
The information provided specifically covers the following:
- the name of the related party and nature of relationship;
- the nature, duration of the contract and particulars of the contract or arrangement;
- the material terms of the contract or arrangement including the value, if any;
- any advance paid or received for the contract or arrangement, if any;
- the manner of determining the pricing and other commercial terms, both included as part of contract and not considered as part of the contract;
- whether all factors relevant to the contract have been considered, if not, the details of factors not considered with the rationale for not considering those factors;
- the persons/authority approving the transaction; and
- any other information relevant or important for the Committee to take a decision on the proposed transaction.
DECISION REGARDING TRANSACTION IN ORDINARY COURSE OF BUSINESS AND AT ARM’S LENGTH
The Audit Committee or the Board shall, in respect of the related party transactions referred to them for approval, shall after considering the materials placed before them; judge if the transaction is in the ordinary course of business or at arm’s length basis.
OMNIBUS APPROVAL BY AUDIT COMMITTEE FOR RELATED PARTY TRANSACTIONS PROPOSED TO BE ENTERED:
The Audit Committee shall grant omnibus approval for normal transactions in ordinary course of business with related parties, same being recurring in nature on annual basis
RELATED PARTY TRANSACTIONS NOT APPROVED UNDER THIS POLICY</p>
In the event the Company becomes aware of a Related Party Transaction with a Related Party that has not been approved under this Policy prior to its consummation, the Company would obtain prior approval from the Audit Committee. In case the Company is not able to take prior approval from the Audit Committee, such a transaction shall not be deemed to violate this Policy, or be invalid or unenforceable, so long as the transaction is brought to the Audit Committee as promptly as reasonably practical after it is entered into or after it becomes reasonably apparent that the transaction is covered by this policy. The Audit Committee shall consider all of the relevant facts and circumstances regarding the Related Party Transaction, and shall evaluate all options available to the Company, including ratification, revision or termination of the Related Party Transaction. In any case, where the Audit Committee determines not to ratify a Related Party Transaction that has been commenced without approval, the Audit Committee, as appropriate, may direct additional actions including, but not limited to, immediate discontinuation or rescission of the transaction. In connection with any review of a Related Party Transaction, the Committee has authority to modify or waive any procedural requirements of this Policy.
TRANSACTIONS WITH THE HOLDING COMPANY:
- Approval of the Audit Committee will not be required to be taken to a transaction, other than a transaction referred to in section 188, between the Company and the Axis Bank.
- Special resolution passed by the Axis Bank w.r.t. Related Party Transactions shall be sufficient for the purpose of the entering into the transaction between the Company and the Axis Bank.
