Related Party Policy

Generally, any person or any entity which is reled to the reporting entity is said to be a related party. Further, a related party can be the situation when a person or a close member of that person’s family is associated with an entity. For example, a person has control, joint control, or significant influence over the entity or is a member of its key management personnel. In that case, the person or entity is called a related party. Section 188 of Companies Act 2013 talks about Related Party Transactions that are applicable to both Private and Public Limited Company.

The Board of Directors (the “Board”) of the Company understands the importance of stakeholders’ confidence and trust in the Company. In order to preserve the same with transparency and to ensure that there is no conflict of interest inflicting any apprehension in the minds of its stakeholders, the Board of the Company, acting upon the recommendation of its Audit Committee (the “Committee), has adopted the policy and procedures with respect to Related Party Transactions of the Company.

PURPOSE OF POLICY

The policy is not only in the best interests of its stakeholders but also in due compliance with the requirements of the Companies Act, 2013 and the Listing Regulations. Pursuant to Regulation 23 of the Listing Regulations, a policy needs to be formulated to deal with Related Party Transactions including formulating a policy on materiality of Related Party Transactions. This policy therefore lays down the mechanism to deal with Related Party Transactions.

What is meant by Related Party Transactions

Since now we know the term Related party let us understand the Related party Transactions.

Any transaction between a Company and its related party associated to:

A transaction of sale, purchase, or any supply of any goods.
Selling, disposing, or buying property of any kind;
Leasing a property of any kind;
Availing or the rendering services of any kind;
Appointment of any agent for purchase/sale of goods, materials, services, or property;
Such related party’s placement to any office or place of profit in which the company, its subsidiary company or associate entity.
Underwriting the subscription of any securities or derivatives thereof of the company;

Rquisite approvals required for Related Party Transactions (RPT)

Approval from Board

Whenever a Company enters into any Related Party Transaction u/s 188 prior approval by way of resolution from the Board of Directors of the Company will be required. [Section 188(1)]

Provided that, If a director is interested in any contract or arrangement with a related party, such director shall not be present at the meeting during discussions on such resolution.

Approval from Shareholders

Whenever a Company enters into any Related Party Transaction exceeding the limits mentioned in the Section it needs to take approval by way of resolution from the shareholders of the Company.

However, a Member of a company who is a related party cannot vote on such resolution for the approval of RPT in General Meeting except:

in case of Private Company and Specified IFSC Public Company [exempted vide MCA Notification dated 5th June 2015 and 4th January 2017]
(ii) in a company where 90% or more members are relatives of promoters or are related parties. [3rd Proviso to Section 188(1)]