Revised listing agreement on related party transactions

Chandru (Querist) 14 August 2014 This query is : Resolved
Dear Co-professionals,

I have following queries on compliance related to related party transactions (RPT) under revised Clause 49 w.e.f. Oct 1, 2014:

Query 1: From the definition of RPT under revised Cl 49–‘a transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged’, does the expression ‘transfer of resources or obligation’ also cover loans, investments, provision of security or guarantee by a listed entity to its related parties? if yes, provide some other activities which also would be covered under these?

Query 2: Material RPT defined as ‘a transaction with a related party shall be considered material if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds five percent of the annual turnover or twenty percent of the net worth of the company as per the last audited financial statements of the company, whichever is higher’

In case, there are transactions with related party of different nature such as purchase transactions, sale transactions, transactions related to leasing of properties, while identifying material RPTs, do we have to club all kinds of RPTs as under expression used ’taken together’ (i.e. Clubbing sales, purchase, lease transactions together and check if the aggregate value exceeds given threshold limits OR to club RPTs of only similar nature (i.e. Clubbing of only all the purchase transactions and check if the aggregate value of purchase transactions exceeds given threshold limits)?

Query 3: As per point no. 4.2 - the provisions of Clause 49(VII) as given in Part-B shall be applicable to all prospective transactions. All existing material related party contracts or arrangements as on the date of this circular which are likely to continue beyond March 31, 2015 shall be placed for approval of the shareholders in the first General Meeting subsequent to October 01, 2014. However, a company may choose to get such contracts approved by the shareholders even before October 01, 2014.

From this para, I understand we need to consider the value of only those contracts or arrangement with related party existing on the date of circular i.e. April 17, 2014 and continuing beyond March 2015. But do we have to consider value of each contract or arrangement or need to take the aggregate value of all the contracts or arrangements with the related party to identify if they are material contracts/arrangements?

Request valuable inputs on these especially from those who have practically handled these issues.

Regards

CS Chandrashekar K

9743148312

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