ஆசிர்வாத் மைக்ரோபைனான்ஸ் லிமிடெட்          Asirvad Microfinance Limited          आशीर्वाद माइक्रोफिनॅन्स लिमिटेड         ആശിർവാദ് മൈക്രോഫിനാൻസ് ലിമിറ്റഡ്          ಅಸೀರ್ವಾಡ್ ಮಿಕ್ರೊಫಿನನ್ಸೆ ಲಿಮಿಟೆಡ್          ਅਸਿਰਵਾਦ ਮਿਕਰੋਫਈਨਂਸੇ ਲਿਮਿਟੇਡ          ଆଶୀର୍ବାଦ ମଇକ୍ରୋଫାଇନାନ୍ସ ଲିଃ          আশির্বাদ মাইক্রো ফাইনান্স লিমিটেড

RELATED PARTY TRANSACTIONS POLICY

1. Preamble

Asirvad Micro Finance Limited (“the Company”) affirms good standard of governance practices and conducts its business in a fair and transparent manner duly complying with the applicable laws as in force. The Company is putting its best efforts consistently to enhance stakeholders long term value without compromising the corporate philosophy, ethics and standard of governance practices.

The Board of Directors (the “Board”) of the Company has adopted this Policy on Related Party Transactions (“Policy” or “RPT Policy”) upon the recommendation of the Audit Committee in compliance with the provisions of Section 188 of the Companies Act, 2013, read with rules made there under, and such other regulation, secretarial and accounting standards as may be applicable including any statutory modifications or reenactment thereof.

2. Objective

This Policy is intended to ensure due and timely identification, approval, disclosure and reporting of transactions between the Company and any of its Related Parties in compliance with the applicable laws and regulations as may be amended from time to time.

The provisions of this Policy are designed to govern the approval process and disclosure requirements to ensure transparency in the conduct of Related Party Transactions in the best interest of the Company and its shareholders and to comply with the statutory provisions in this regard.

3. Definitions

“Related Party” means related party as defined in Regulation 2(1)(zb) of the Securities and Exchange Board of India (Listing Obligations and Disclosures Requirements), Regulations, 2015 (‘SEBI Listing Regulations’), which inter alia provides that a “related party” means a related party as defined under sub-section (76) of section 2 of the Companies Act, 2013 or under the applicable accounting standards.

Further, any person or entity belonging to the promoter or promoter group of the Company and holding 20% or more of the shareholding in the Company shall be deemed to be a related party.1

Pursuant to Section 2(76) of the Companies Act, 2013, related party with reference to a Company, means:

  1. a Director or his relative ;
  2. a Key Managerial Personnel (KMP) or his relative ;
  3. a Firm, in which a director, manager or his relative is a partner ;
  4. a Private Company in which a director or manager or his relative is a member or director;
  5. a Public Company in which a director or manager is a director and holds along with his relatives, more than 2% (two per cent) of its paid-up share capital;
  6. any body corporate whose board of directors, managing director, or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager ;
  7. any person under whose advice, directions or instructions a director or manager is accustomed to act;

Provided that nothing in sub-clauses vi and vii shall apply to the advice, directions or instructions given in a professional capacity;

8. any body corporate which is a holding, subsidiary or an associate company of the Company;

9. any body corporate which is a subsidiary of a holding company to which it is also a subsidiary;

10. any body corporate which is an investing company or the venturer of the Company

For the purpose of clause x above, “the investing company or the venturer of a company” means a body corporate whose investment in the Company would result in the Company becoming an associate company of the body corporate.

  • Director (other than Independent Director) or KMP of the holding company or his relative;

“Relative” means relative as defined under the Companies Act, 2013 and includes anyone who is related to another, if –

  1. They are members of a Hindu undivided family (HUF) ;
  1. They are husband and wife ; or
  1. Father (including step-father)
  1. Mother (including step-mother)
  • Son (including step-son)
  • Son’s wife
  • Daughter
  • Daughter’s husband
  1. Brother (including step-brother)
  • Sister (including step-sister).

“Associate Company” means a company which has significant influence but which is not a subsidiary of the Company having such influence and includes a joint venture company.

“Significant Influence” means control of at least 20 (twenty) % of the total voting power  or control of or participation in business decisions under an agreement.

“Joint Venture” means a contractual arrangement whereby two or more parties undertake an economic activity which is subject to joint control.

“Control” shall include:

  1. The right to appoint majority of the Directors or to control the management or policy  decisions
  • exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders’/voting agreements etc.; or ownership, directly or indirectly, of more than one half of the voting power of the Company;

or

  • a substantial interest in voting power and the power to direct, by statute or agreement, the financial and/or operating policies of the Company.

“Related Party Transaction” (“RPT”) means any transaction  directly  or  indirectly involving any Related Party which is a transfer of resources, services or obligations between the Company  and a related party, regardless of whether or not a price is charged, either single or a group of transactions in a contract.

“Specific Related Party Transaction” shall mean any of the following transactions entered into  by the Company with any of its Related Parties which are, either not in the ordinary course of business or not on arm’s length basis:

  1. sale, purchases or supply of any goods or materials;
  • selling or otherwise disposing of, or buying, property of any kind;
  • leasing of property of any kind;
  • availing or rendering of any services;
  • appointment of any agent for purchases or sale of goods, materials, services or property;
  • such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company; and
  • underwriting the subscription of any securities or derivatives thereof, of the company.

“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.

“Office or Place of Profit” means any office or place:

  1. where such office or place is held by a director, if the director holding it receives from the

company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent free accommodation, or otherwise;

  1. where such office or place is held by an individual other than a director or by any firm,  private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from the company anything by way of  remuneration,  salary,  fee, commission, perquisites, any rent‐free accommodation, or otherwise;

“Responsibility Officer” means the Chief Financial Officer (CFO) of the Company. The Board may, where it is considered necessary so to do, appoint such other officer as it may consider   proper as such Responsibility Officer(s).

“Applicable Laws” means the Companies Act, 2013 and the rules made thereunder, SEBI Listing Regulations and include any other statute, law, standards, regulations or other governmental instruction relating to Related Party Transactions.

All terms not defined herein shall take their meaning from the Applicable Laws.

4. Policy

All RPTs must be reported to the Audit Committee and referred for approval by the Committee in accordance with this Policy.

5. Identification of Related Parties

The Responsibility Officer shall at all times:

  1. Identify and keep on record list of Company’s Related Parties, along with their requisite details.
  2. The Responsibility Officer shall identify such functional heads, departmental heads and such other employees (Designated Employees) who are responsible for entering into contracts/ arrangements/ agreements with entities for and on behalf of the Company and circulate the list of Related Parties to all such Designated Employees of the Company along with the approval thresholds for entering into transactions with such listed Related Parties.
  • The Responsibility Officer shall also set down the mechanism for reporting of such transactions proposed to be entered or entered with related parties by such Designated Employees as specified in (b) above.
  • The record of Related Parties shall be updated whenever necessary and shall be reviewed at least once in every six months.
  • The Responsibility Officer shall be responsible for implementation and monitoring of the Company’s RPT Policy at all times and submit a half yearly report of  the same to  the  Audit Committee for review.

6. Identification of Potential RPTs

Each Director, KMP and Senior Management Personnel (SMP) is responsible for providing notice to the Board or Audit Committee of any potential RPT involving him or her or his or her Relative, including any additional information about the transaction that the Board/Audit Committee may reasonably request.

The Board/Audit Committee will determine whether the transaction does,  in  fact,  constitute a RPT requiring compliance with this Policy.

The Company strongly prefers to receive such notice of any potential Related Party Transaction well in advance so that the Audit Committee/Board has adequate time to obtain and review information about the proposed transaction.

7. Review and Approval of RPTs

  1. Audit Committee Approval

RPTs, if any, will be referred to the Audit Committee for review and prior approval, wherever applicable.

The Audit Committee may grant Omnibus Approval for RPTs proposed to be entered into by the Company subject to the following conditions:

  1. It shall, after obtaining approval of the Board of Directors, lay down the criteria for granting

The omnibus approval in line with the Policy, which shall include the following, namely:

  • maximum value of the transactions, in aggregate, which can be allowed under the omnibus route in a year;
  • the maximum value per transaction which can be allowed;
  • extent and manner of disclosures to be made to the Audit Committee at the time of seeking omnibus approval;
  • review, at such intervals as the Audit Committee may deem fit, related party transaction entered into by the company pursuant to each of the omnibus approval made;
  • transactions which cannot be subject to the omnibus approval by the Audit Committee.
  1. The Audit Committee shall consider the following factors while specifying the criteria for making omnibus approval, namely:
  • repetitiveness of the transactions (in past or in future);
  • justification for the need of omnibus approval.
  1. It shall satisfy itself regarding the need for such omnibus approval for transactions of repetitive nature and that such approval is in the interest of the Company.
  1. Such omnibus approval shall specify –
  • The name/s of the related party, nature of transaction, period  of  transaction, maximum amount of transaction that can be entered into;
  • The indicative base price / current contracted price and the  formula for variation in  the price if any, and
  • any other information relevant or important for the Audit Committee to take a decision on the proposed transaction.

Provided that where the need for RPT 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 (One) crore per transaction.

  • It shall review, at least on a quarterly basis, the details of RPTs entered into by the Company pursuant to each of the omnibus approval given.
  • Such omnibus approvals shall be valid for a period not exceeding 1 (one) financial year and shall require fresh approvals after the expiry of 1 (one) financial year.
  • Omnibus approval shall not be made for transactions in respect of selling or disposing of the undertaking of the Company.
  • Any other conditions as the Audit Committee may deem fit.

Any Member of the Audit Committee who has a potential interest in any RPT will recuse himself or herself from meeting and abstain from discussion and voting and also not counted in the quorum of the meeting on the approval of the RPT.

In order to review a RPT, the Audit Committee will be furnished with all relevant material information of the RPT, including the terms of the transaction, the business purpose of thetransaction, the benefits to the Company and to the Related Party, and any other relevant matters.

In determining whether to approve a RPT, the Audit Committee will consider the following factors, among others, to the extent relevant to the RPT:

  • Name of the related party and the relationship
  • Nature and duration of transaction and material terms including the value, if any
  • The manner of determining the pricing and whether the terms of the RPT are fair and on arm’s length basis to the Company
  • Business rationale for such transactions.

In case of transaction, other than transactions referred to in Section 188 of the Act, and where Audit Committee does not approve the transaction, it shall make its recommendations to the Board. Further, in case any transaction involving any amount not exceeding Rupees 1 (one) crore is entered into by a director or officer of the Company without obtaining the approval of the Audit Committee and it is not ratified by the Audit Committee within 3 (three) months from the date of the transaction, such transaction shall be voidable at the option of the Audit Committee and if the transaction is with the related party to any director or is authorised by any other director, the director concerned shall indemnify the Company against any loss incurred by it.

The requirement of obtaining Audit Committee approval or any subsequent modification of transactions of the Company with related parties by the Audit Committee shall not apply to a transaction, other than a transaction referred to in Section 188, between a holding company and its wholly owned subsidiary company.

II. Board Approval

If the Audit Committee determines that a RPT should be brought before the Board, or it is mandatory under any Applicable law for Board to approve a RPT, or in the case of Specific RPTs, then the considerations set forth above shall apply to the Board’s review and approval of the matter, with such modification as may be necessary or appropriate under the circumstances.

III. Shareholder’s Approval

If the Audit Committee and the Board determines that a RPT should be brought before the Shareholders, or it is mandatory under any Applicable law for the shareholders to approve a RPT   or in case of material RPTs, then such shareholder approval, as may be necessary or appropriate under the circumstances, shall be obtained and the considerations set forth above shall  apply to the Shareholders’ approval of the matter.

Notwithstanding the foregoing, the following RPTs shall not require approval of Audit Committee or Board or Shareholders:

  1. Any transaction that involves the providing of compensation to a Director or KMP in connection with his or her duties to the Company or any of its subsidiaries or associates, including the reimbursement of reasonable business and travel expenses incurred in the Ordinary Course of Business.
  1. Any transaction in which the Related Party’s interest arises solely from ownership of securities issued by the Company and all holders of such securities receive the same benefits pro rata as  the Related Party.
  1. Any transaction arising out of Compromises, Arrangements and Amalgamations dealt with under specific provisions of the Companies Act, 2013.
  1. Reimbursement of pre-incorporation expenses incurred by a Related Party as approved by the Board of Directors.
  • Any other exception which is consistent with the Applicable Laws, including any rules or regulations made thereunder.

8. RPTs not approved under this Policy

In the event the Company becomes aware of a RPT with a Related Party that has not been approved under this Policy prior to its consummation, the matter shall be reviewed by the Audit Committee. The Audit Committee shall consider all of the relevant facts and circumstances regarding the RPT, and shall evaluate all options available to the Company, including ratification, revision or termination of the RPT. The Audit Committee shall also examine the facts and circumstances pertaining to the failure of reporting such RPT to the Committee under this Policy, and shall take any such action it deems appropriate.

In any case, where the Audit Committee determines not to ratify a RPT 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. The Audit Committee has authority to modify or waive any procedural requirements of this Policy.

9. Existing Related Party Transactions (RPTs)

This Policy shall operate prospectively and all the agreements which have been entered before the effective date of this Policy and are in accordance with the then prevailing laws shall be valid and effective.

10. Disclosures/ Amendment

Necessary disclosures shall be made by the Company in its Annual Report as may be required under applicable laws.

Pursuant to Section 134(3)(h) of the Companies Act, 2013, particulars of  contracts  or arrangements with related parties referred to in Section 188 of the Companies Act, 2013 shall be disclosed in the Director’s Report in the prescribed format.

The Company shall disseminate this policy to all functional and operational heads and other concerned persons of the Company and shall be posted on website of the Company. Further, a web link thereto shall be provided in the Annual Report of the Company.

The rights to interpret/amend/modify this Policy vests in the Audit Committee/ Board of Directors of the Company. Further, this Policy shall be reviewed by the Audit Committee/ Board of Directors at least once every 3 (three) years and updated accordingly.

Any matter not provided for in this Policy shall be handled in accordance with applicable laws, and the Company’s Articles of Association.

This Policy is in conformity with Applicable Laws. In case any clause /provision of this Policy is inconsistent with Applicable Laws, the provisions of such Laws shall prevail. Any subsequent amendment / modification in the Applicable Laws shall automatically apply to this Policy.

Policy Review:

This policy shall be reviewed and reassessed by the Audit Committee annually and appropriate recommendation shall be made to the Board.