POLICY ON RELATED PARTY TRANSACTIONS
OBJECTIVE
The Companies Act, 2013 places a lot of emphasis on Related party transactions and the objective of this policy is to bring uniform practices relating to Related party transactions so as to comply the Companies Act, 2013, RBI Directives, the Transfer pricing norms prescribed under the Income tax Act, 1961 and accounting standards. Further the policy is intended to ensure timely identification, approval, disclosure and reporting of related party transactions in compliance with the applicable laws and regulations.
RELATED PARTY
Related Party with reference to the Companies Act, 2013 means-
1.A Director or his relative
2.A Key Managerial personnel (KMP) or his relative
- A firm, in which a director, manager or his relative is a partner
- A private company in which a director or manager or his relative is a member or director
- A public company in which a director or manager is a director and holds along with his relatives, more than two percent of its paid-up share capital
- Anybody corporate whose Board of Directors, managing director or manager is accustomed to action accordance with the advice, directions or instructions of a director or manager.
7.Any person on whose advice, directions or instructions a director or manager is accustomed to act.
8.Any Body Corporate which is-
- a holding, subsidiary or an associate company of such company
- a subsidiary of a holding company to which it is also a subsidiary or
iii. an investing company or the venturer of a company
KEY MANAGERIAL PERSONAL (KMP)
Key Managerial Personal shall include the following personal as per section 2 (51) of the
Companies Act 2013.
- The Chief Executive Officer or the Managing Director or the Manager.
- The company Secretary
- The whole- time director
- The Chief Financial Officer
- Any Such officer as designated as KMP by the Board.
RELATIVE
As per Section 2(77) of the Companies Act, 2013, Relative means
1.They are the members of Hindu Undivided Family
2.They are husband and wife or
3.One person is related to the other
A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely: –
Father, Step-father, Mother, step-mother, son, step-son, son’s wife, Daughter, Daughter’s husband,
Brother, Step-Brother, Sister, Step-sister.
RELATED PARTY TRANSACTIONS
Sale, purchase or supply of any goods or materials
Selling or otherwise disposing of or buying, property of any kind
Availing or rendering of any services
Appointment of any agent for purchase or sale of goods, materials, services or property
Appointment of a person to any office or place of profit in the company, its subsidiary company or associate company.
RELATED PARTY TRANSACTIONS EXPOSURE LIMIT
SINGLE PARTY GROUP OF PARTIES
LENDING 15% of Net Owned Funds (NOF) 25% of NOF
INVESTMENT 15% of NOF 25% of NOF
BOTH LENDING AND INVESTMENT 25%of NOF 40% of NOF
Further the company may exceed the concentration of credit/investment norms by 5% for any single Party and 10% for a single group of parties, if the additional exposure is on account of infrastructure Loan and/or investment.
Also, the company shall accept unsecured loans from Directors/Relatives of Directors/Group Concerns as decided by the Board from time to time subject to a maximum of Rs.10 crores (Rupees Ten Crores only) at any point of time.
REPORTING AND APPROVAL
All the proposed Related party Transactions shall be referred to the Audit Committee of the Board (ACB) and the committee shall accord its appr1oval for such transactions which it considers as in the ordinary course of business and at “Arm’s length basis”. (Arm’s length means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest as defined under the Companies Act, 2013.)
The proposed Related Party Transactions which are not in the ordinary course of business and which are not at “Arm’s length basis” shall be referred to the Board and the Board shall deliberate the relevant factors such as the nature of transactions, material terms and conditions, pricing methodology and business rationale for entering into such transactions and accord its approval to the transactions which it deems fit.
“Material Related party Transaction” such as Related party transaction which individually or taken together with previous transactions during the financial year exceeds ten percent of the annual consolidated turnover of the company as per the last audited financial statements of the company or such limits as may be prescribed either in the Companies Act, 2013 and /or other applicable regulations shall be placed before the shareholders for approval by special resolution.
The company shall submit to the board a quarterly statement of all the related party transactions which are approved by the Audit Committee, the Board and the shareholders.
DISCLOSURE
As per RBI Directives, the Related party transactions shall be disclosed as ‘Notes to Accounts ‘to the Financial Statements.
REVIEW
The policy shall be reviewed by the Board once in a year. The policy is subject to change in line with the Companies Act 2013/ directions issued by the RBI/Board. The policy is valid for the period from 01.04.2025 to 31.03.2026 .