Determination of Related Party Transactions policy

POLICY ON MATERIALITY OF RELATED PARTY TRANSACTIONS AND DEALING WITH RELATED PARTY TRANSACTIONS

  1. Title

1.1 This policy shall be called the ‘Policy on materiality of related party transactions and dealing with related party transactions’.

  1. Commencement

2.1 The Policy shall come into force with effect from the date of listing of the equity shares of VARYAA CREATIONS LIMITED (the  “Company”)  on  SME Platform of BSE  Limited.

  1. Objective

3.1 Related party transactions have been one of the major areas of focus for corporate governance reforms  being initiated in India. The changes introduced in the corporate  governance  norms through  Section  188  of  the  Companies  Act,  2013,  as  amended  and  the  rules  framed thereunder (“Companies Act”) and Regulation 23 of the Securities and Exchange Board of India  (Listing  Obligation  and  Disclosure  Requirements)  Regulations,  2015,  as  amended (“SEBI Listing Regulations”) require the companies to have enhanced transparency and due process  for  approval  of  the  related  party  transactions. Pursuant  thereto,  Section  188  of  the Companies Act and Regulation 23 of the SEBI Listing Regulations require the Company to formulate a policy on materiality of related party transactions and also on dealing with related party transactions.

3.2 Accordingly,  the  board  of  directors  (“Board”)  of  the  Company  has  adopted  the  following policy with regard to related party transactions. The Audit Committee of the Company will review  this  policy  on  an  annual  basis  and  propose  any  modifications  to  the  Board  for approval.

  1. Definitions
    1. “Arm’s length transaction” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.
    2. “Audit  Committee”  means  the  audit  committee  of  the  board  of  directors  of  the Company.
    3. “Board” means the Board of directors of the Company.
    4. “Company” means VARYAA CREATIONS LIMITED.
    5. “Key  Managerial  Personnel”  or  “KMPs” means  Key  Managerial  Personnel  as defined under the Act and includes:
      • Managing Director, or Chief Executive Officer or Manager; 
      • the Whole Time Director;
      • Company Secretary; and
      • Chief Financial Officer.

    6.“Material Related Party Transaction” in relation to the Company means a related party transaction which individually or taken together with previous transactions with a related party during a financial year, exceeds ten per cent of the annual consolidated turnover of the Company as per the last audited financial statements of the Company.

   7.“Ordinary Course of Business” with reference to a transaction with a related party means a transaction which is:

      • Carried out in the normal course of business envisaged in accordance with the Memorandum of Association of the Company as amended from time to time;
      • historical practice with a pattern of frequency; 
      • common commercial practice; or 
      • meets   any   other   parameters/criteria   as   decided   by   the   Board/Audit Committee, from time to time.

      8.“Policy” means this policy, as amended from time to time.

     9.“Related Party” in relation to the Company means a party related with the Company in  any  of  the  ways  as  laid  down  in  section  2(76)  of  the  Companies  Act  or  under applicable accounting standards.

    10.“Related Party Transaction” means a transfer of resources, services or obligations between a Company and a related party, regardless of whether a price is charged and a “transaction” with a related party shall be construed to include a single transaction or  a  group  of  transactions  in  a  contract,  and  includes  transactions  as  defined  as  a “related party transaction” under the relevant provisions of the Companies Act or the SEBI Listing Regulations or any other related law, regulation, standard.

  1. Interpretation

5.1 Any words used in this Policy but not defined herein shall have the same meaning prescribed to  it  in  the  Companies  Act,  the  Securities  and  Exchange  Board  of  India  Act,  1992,  as amended, or rules and regulations made thereunder including the SEBI Listing Regulations, the  applicable  accounting  standards  or  any  other  relevant  legislation/law  applicable  to  the Company.

5.2 The reference to the masculine gender in the Policy shall be deemed to include a reference to feminine gender.

5.3 In case of any dispute or difference upon the meaning/interpretation of any word or provision in this policy, the same shall be referred to the Audit Committee and the decision of the Audit Committee shall be final. In interpreting such term/provision, the Audit Committee may seek the help of any of the officers of the Company or an external expert as it deems fit.

  1. Procedure

6.1   Disclosure by Directors

6.1.1 Every  director  shall  at  the  beginning  of  the  financial  year  provide  information  by  way  of written  notice  to  the  Company  regarding  his  concern  or  interest  in  the  entity  with  specific concern to parties which may be considered as Related Party with respect to the Company and shall also provide the list of relatives which are regarded as Related Party as per this Policy.

6.1.2 Directors are also required to provide the information regarding their engagement with other entity  during  the  financial  year  which  may  be  regarded  as  related  party  according  to  this Policy.

6.2   Identification of Transaction with Related Parties

6.2.1     Each  Director  and  Key  Managerial  Personnel  is  responsible  for  providing  notice  to  the Company  or Audit Committee of any  potential Related Party  Transaction involving him or her or his or her relative, including any additional information about the transaction that the Board/Audit Committee may reasonably request. Audit Committee will determine whether a transaction does constitute a Related Party Transaction requiring compliance with this Policy.

6.2.2     Each  Director  and  Key  Managerial  Personnel  shall  make  an  annual  declaration  to  the Company and this declaration shall be placed before the Audit Committee and the Board of Directors at their first meeting held at the succeeding financial year.

6.2.3     Any change in the list of relatives shall be intimated by the Directors and KMPs by way of a fresh declaration to the Company.

  1. Approval of Related Party Transactions

7.1 Audit Committee

7.1.1 Related party transactions will be referred to the next regularly scheduled meeting of Audit Committee for review and approval. Any member of the Committee or the Directors of the Board who has potential interest in any Related Party Transaction will in terms of Chapter XII Rule 15(2) shall not be present at the meeting during the discussions on the subject matter and shall recuse himself or herself and abstain from discussion and voting on the approval of the Related Party Transaction.

7.1.2 All the transactions which are identified as Related Party Transactions should be preapproved by the Audit Committee before entering into such transaction.

7.1.3 The Audit Committee shall consider the following factors while deliberating the related party transactions for its approval:

        1. Name of party and details explaining nature of relationship;
        2. Duration of the contract and particulars of the contract and arrangement;
        3. Nature of transaction and material terms thereof including the value, if any;
        4. Manner of determining the pricing to ascertain whether the same is on arm’s length;
        5. Business rationale for entering into such transaction; and
        6. Any other information relevant or important for the Board to take a decision on the proposed transaction.

7.1.4  In determining whether to approve a Related Party Transaction, the Committee will consider the following factors, among others, to the extent relevant to the Related Party Transaction:

        1. Whether the terms of the Related Party Transaction are fair and on arm’s length basis to the Company and would apply on the same basis if the transaction did not involve a Related Party;
        2. Whether  there  are  any  compelling  business reasons  /  rationale  for  the  Company  to enter into the Related Party Transaction and the nature of alternative transactions, if any;
        3. Whether   the   Related   Party   Transaction   would   affect   the   independence   of   an independent Director;
        4. Whether the proposed transaction includes any potential reputational risk issues that may arise as a result of or in connection with the proposed transaction;
        5. Whether  the  Company  was  notified  about  the  Related  Party  Transaction  before  its commencement and if not, why pre-approval was not sought and whether subsequent ratification is allowed and would be detrimental to the Company; and
        6. Whether the Related Party Transaction would present an improper conflict of interest for any Director or Key Managerial Personnel of the Company, taking into account the  size  of  the  transaction,  the  overall  financial  position  of  the  Director,  Executive Officer  or  other  Related  Party,  the  direct  or  indirect  nature  of  the  Director’s,  Key Managerial  Personnel’s  or  other  Related  Party’s  interest  in  the  transaction  and  the ongoing    nature    of    any    proposed    relationship    and    any    other    factors    the Board/Committee deems relevant.

7.1.5  The Audit Committee may grant omnibus approval for Related Party Transactions proposed to be entered into by the Company subject to the following conditions:

        1. The Audit Committee shall lay down the criteria for granting the omnibus approval in line with the Policy on Related Party Transactions of the Company and such approval shall be applicable in respect of transactions which are repetitive in nature.
        2. The Audit Committee shall satisfy itself the need for such omnibus approval and that such approval is in the interest of the Company;
        3. Such  omnibus  approval  shall  specify  (i)  the  name/s  of  the  related  party,  nature  of transaction, period of transaction, maximum amount of transaction that can be entered into,  (ii)  the  indicative  base  price  /  current  contracted  price  and  the  formula  for variation in the price if any and (iii) such other conditions as the Audit Committee may deem fit;Provided that where the need for Related Party Transaction cannot be foreseen and aforesaid details are not available, Audit Committee may grant omnibus approval for such transactions subject to their value not exceeding Rs.1 crore per transaction.
        4. Audit  Committee  shall  review,  at  least  on  a  quarterly  basis,  the  details  of  Related Party  Transactions  entered  into  by  the  Company  pursuant  to  each  of  the  omnibus approval given.
        5. Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year.

7.2 Board of Directors

7.2.1   In case of Related Party Transaction which is not in the ordinary course of business or not at arm’s  length  transaction,  whether  or  not  it  is  a  material  Related  Party  Transaction,  prior approval  of  the  Board  through  a  resolution  passed  at  the  meeting  of  the  Board  shall  be necessary.

7.2.2  Where any director is interested in any contract or  arrangement  with a Related Party, such director  shall  not  be present at the  meeting during  discussions on the subject  matter of the resolution relating to such contract or arrangement.

7.2.3     The policy shall be reviewed by the Board on an yearly basis.

7.3 Shareholder approval

7.3.1     All material related party transactions shall require prior approval of the shareholders through resolution and the Related Parties shall abstain from voting on such resolutions whether the entity is a Related Party to the particular transaction or not.

7.3.2     If a related party transactions is not in the ordinary course of business, or not at arm’s length price and exceeds certain thresholds as prescribed under Section 188 of the Companies Act, it shall require shareholders’  approval by  a resolution. The Related Parties shall abstain from voting as shareholders in case  of Related Party  Transactions which require the approval of shareholders.

7.3.3     However, the shareholders’ approval is not required for the transactions entered into between the  Company  and  its  wholly  owned  subsidiaries  whose  accounts  are  consolidated  with  the Company and placed before the shareholders at the general meeting for approval.

7.4 Process for Dealing with Related Party Transactions

7.4.1     A list of all the related parties in relation to the Company received from the Board shall be updated from time to time.

7.4.2     Basis the above mentioned list of related parties, every department shall, prior to entering in to any contract or arrangement with a related party, ascertain whether the proposed contract or arrangement satisfies the approval mechanism prescribed under this Policy.

7.4.3     The contract/arrangement shall not be entered in to without the necessary approval from the Audit Committee/Board/shareholders, as the case may be. Compliance to this condition will strictly  be  adhered  to  by  the  concerned  department  proposing  the  underlying  contract  or arrangement.

  1. Reporting of Related Party Transactions

8.1 Every contract or arrangement, which is required to be approved by the Board/shareholders under this Policy, shall be referred to in the Board’s report to the shareholders along with the justification for entering into such contract or arrangement.

8.2 The  details  of  material  transactions  with  related  parties  will  be  included  in  the  corporate governance reports which are required to be submitted to the stock exchanges on a quarterly basis.

8.3 The  Company  shall  disclose  the  policy  on  dealing  with  Related  Party  Transactions  on  its website and a web link thereto shall be provided in the Annual Report of the Company.

  1. Amendments

9.1 Any change in the Policy shall be approved by the Board of Directors of the Company. The Board of Directors shall have the right to withdraw and/or amend any part of this Policy or the entire Policy, at any time, as it deems fit, or from time to time, and the decision of the Board in this respect shall be final and binding. Any subsequent amendment/modification in the  Act  or  the  Listing  Regulations  and/or  any  other  laws  in  this  regard  shall  automatically apply to this Policy.

  1. Communication of this Policy

10.1 This Policy shall be posted on the website of the Company.