Policy on materiality of RPT and on dealing with RPT

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1. INTRODUCTION

The Board of Directors (“Board”) of Anthem Biosciences Limited (“Company”) has adopted the  following policy on materiality of related party transactions and on dealing with related party  transactions (“Policy”) with regard to the Related Party Transactions (“RPT”) in line with the  requirements of Companies Act, 2013 (“Act”) and Regulation 23 of the Securities and Exchange Board  of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing  Regulations”) as may be applicable to the Company.  

This Policy is intended to ensure that proper reporting, approval and disclosure processes are in place  to regulate transactions between the Company and its Related Parties based on the laws and regulations  applicable to the Company.  

2. OBJECTIVE

This policy is framed with the objective to set out:  

a) The manner of dealing with the transactions between the Company and its Related Parties.  b) Review, approval process and disclosure requirements of Related Party Transactions; and  c) Materiality thresholds for Related Party Transactions. 

3. Definitions

Definition of some of the key terms used in this policy are given below:  

  1. “Act” means Companies Act, 2013, and the rules thereunder, as amended from time to time.  
  2. “Accounting Standards” means the standards of accounting or any addendum thereto for  companies or class of companies referred to in Section 133 of the Act.  
  3. “Arm’s Length Basis” means a transaction between the Company and its Related Party(ies)  that is conducted as if they were unrelated, so that there is no conflict of interest. Pricing though  being an important factor, may not be the only determinant of a transaction being at arm’s  length. 
  4. “Associate Company” in relation to another company, means a company in which that other  company has a significant influence (defined below), but which is not a subsidiary company of  the company having such influence and includes a joint venture company.  
  5. “Audit Committee” means the Committee of the Board formed under Section 177 of the Act  and Regulation 18 of the SEBI Listing Regulations.  
  6. “Board of Directors” or “the Board” means the Board of Directors of Anthem Biosciences  Limited, as constituted from time to time.  
  7. “Company” means Anthem Biosciences Limited, registered under the Companies Act, 1956
  8. “Key Managerial Personnel” – As per 2(51) of the Act, Key Managerial Personnel (KMP),  in relation to a company, means —  
    1. the Chief Executive Officer or the Managing Director or the Manager;  
    2. the Company Secretary;  
    3. the Whole-time Director;  
    4. the Chief Financial Officer;  
    5. such other officer, not more than one level below the directors who is in whole-time  employment, designated as key managerial personnel by the Board; and  
    6. such other officer as may be prescribed.  
  9. “Material Related Party Transaction(s)” means a transaction with a related party where the transaction(s) to be entered into individually or taken together with previous transaction(s) during a financial year exceeds Rs. 1,000 crores or 10% of the annual consolidated turnover of  the Company, as per the last audited financial statements of the Company, whichever is lower;  
  10. Notwithstanding the above, a transaction involving payments made to a related party with  respect to brand usage or royalty shall be considered material if the transaction(s) to be entered  into individually or taken together with previous transactions during a financial year, exceed  5% of the annual consolidated turnover of the Company as per the last audited financial  statements of the Company.  
  11. “Material Modifications” means and includes any modification in the existing related party transaction having variance of 10% in value of the transaction or Rs. 1 Crore, whichever is higher, to the existing Related Party Transaction which is already approved by the Audit  Committee or Board or Shareholders as the case may be, or such modification as may be  decided by the Audit Committee from time to time.  
  12. Whereas, with respect to material related party transactions, the material modification will be  decided by the Audit Committee from time to time.  
    1. “Policy” shall mean this policy on materiality of related party transactions and on dealing with  related party transactions.  
    2. ‘‘Relative’’, with reference to any person, means a relative as defined under Sub section (77)  of Section 2 the Companies Act 2013 and sub regulation (zd) of Regulation 2 SEBI Listing  Regulation.  
    3. “Related Party(ies)” means a related party as defined under Sub section (76) of Section 2 of  the Companies Act 2013 or sub regulation (zb) of Regulation 2 SEBI Listing Regulation or  under the applicable accounting standards as amended from time to time;  
    4. “Related Party Transaction” or “RPT” means a transaction involving a transfer of resources,  services or obligations between:  
      1. the Company or any of its subsidiaries on one hand and a related party of the listed entity  or any of its subsidiaries on the other hand; or 
      2. the Company or any of its subsidiaries on one hand, and any other person or entity on  the other hand, the purpose and effect of which is to benefit a related party of the  Company or any of its subsidiaries; regardless of whether 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, including but not  limited to:  
        1. sale, purchase or supply of any goods or materials;  
        2. selling or otherwise disposing of, or buying, property of any kind;  
        3. leasing of property of any kind;  
        4. availing or rendering of any services;  
        5. appointment of any agent for purchase or sale of goods, materials, services or property;  f. appointment to any office or place of profit in the Company, its subsidiary or associate  company  
        6. underwriting the subscription of any securities or derivatives thereof, of the Company.  Provided that the following shall not be a related party transaction:  
        7. the issue of specified securities on a preferential basis, subject to compliance of the  requirements under the Securities and Exchange Board of India (Issue of Capital and  Disclosure Requirements) Regulations, 2018;  
        8. the following corporate actions by the Company which are uniformly applicable/offered  to all shareholders in proportion to their shareholding:  
          1. Payment of dividend  
          2. Sub-division or consolidation of securities; 
          3. issuance of securities by way of a rights issue or a bonus issue; and  
          4. buy-back of securities.  
          5. acceptance of fixed deposits by banks/Non-Banking Finance Companies at the terms  uniformly applicable/offered to all shareholders/public, subject to disclosure of the  same along with the disclosure of related party transactions every six months to the  stock exchanges), in the format as specified by the Board  
          6. acceptance of current account deposits and saving account deposits by banks in  compliance with the directions issued by the Reserve Bank of India or any other central  bank in the relevant jurisdiction from time to time  

Explanation: For the purpose of clauses (c) and (d) above, acceptance of deposits  includes payment of interest thereon.  

  1. retail purchases from Anthem Bioscience or any of its subsidiaries by its directors or  employees, without establishing any business relationship and at the terms which are  uniformly applicable/offered to all employees and directors.  
  2. Significant influence for the purpose of the above definition shall mean control of at least 20%  (twenty per cent) of total voting power or control of or participation in business decisions under  an agreement.  
  3. “Stock Exchanges” means the stock exchanges where the specified securities of the Company  are listed.  
  4. “Subsidiary Company” or “Subsidiary” means a company as defined under Section 2(87) of  the Act. 
  5. “SEBI Listing Regulations” means the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, as amended from time to time.
  6. “Transactions in the ordinary course of business” mean usual transactions, customs,  practices and other activities that are connected to or necessary for the business of the Company  and satisfy the following principles:  
  7. i) The transaction/activity is permitted under the Memorandum and the Articles of  Association of the Company;  
    ii) The transaction/activity is carried on a frequent or regular basis or is as per the industry  practise and 
    iii) The terms of the transaction/activity are similar to those which would be otherwise  applicable to transactions with unrelated parties.  
  8. “Unforeseen Related Party Transaction” means a related party transaction, where the need  for such transaction cannot be foreseen, the details whereof necessary for seeking an omnibus  approval of the Audit Committee are not available and the value of such transaction does not  exceed Rupees one crore per transaction per year.  
  9. “Industry Standards” shall mean the Industry Standards on “Minimum information to be  provided for Review of the Audit Committee and Shareholders for Approval of Related Party  Transaction (RPT)” as notified by SEBI.  

4. Identification and Approval Process

Identification of Related Parties and transactions with them  

  1. The Company shall identify Related Parties (including those of its subsidiaries), as per  requirements of the Companies Act, 2013 and SEBI Listing Regulations and keep the related  party list updated from time to time;  
  2. Each Director and KMP shall disclose to the Company Secretary at the time of appointment,  beginning of every financial year and whenever there is any change in the disclosure so made,  about all relatives, persons, entities, firms in which he/she is interested, whether directly or  indirectly.  
  3. The notice of any potential RPT shall be given well in advance to the Audit Committee and  shall also contain adequate information about the Related Party transaction(s).  d. The CFO together with the Compliance Officer shall identify the related parties and  transactions with them as per the applicable provisions of the Act and SEBI Listing  Regulations.  
  4. The CFO and the Compliance Officer shall be responsible to notify the Audit Committee and  Board of any such potential Related Party Transactions.  
  5. The CFO and the Compliance Officer shall always keep a record of all Related Parties of the  Company and the transactions with all Related Parties. 
  6. Once the related party transactions are identified, the Management shall categorize the transactions  under the following categories as per the Industry Standards and place applicable disclosures before  the Committee seeking approval:
    1. Material Related Party Transactions  
    2. Other Related Party Transactions, but with promoter or promoter group or person/ entity in  which promoter or promoter group has concern or interest.  
    3. Residual Related Party Transactions.  

4.1 Review and Approval of RPT by Audit Committee  

  1. Prior approval of the Audit Committee shall be required for 
  2. All Related Party Transactions and subsequent material modifications as defined by the Audit  Committee;  
  3. RPTs where subsidiary is a party but the Company is not a party and the transaction value  whether entered individually or taken together with the previous transaction during the  financial year exceeds the threshold of 10% of the standalone turnover of the subsidiary. 
  4. Prior approval of the Audit Committee shall not be required for:
    1. Related Party Transactions, where the listed subsidiary is a party, but the Company is not a  party, and if Regulation 23 and Regulation 15(2) of SEBI Listing Regulations are applicable  to such listed subsidiary.  
    2. Related Party Transactions of unlisted subsidiaries of listed subsidiary of the Company, where  the prior approval of the audit committee of the listed subsidiary is obtained. 
  5. Transactions entered into between the Company and its wholly owned subsidiary whose  accounts are consolidated with the Company and placed before the shareholders at the general  meeting for approval.  
  6. Transactions entered into between two wholly-owned subsidiaries of the Company, whose  accounts are consolidated with the Company and placed before the shareholders at the general  meeting for approval.  
  7. Remuneration and sitting fees paid by Anthem Bioscience or its subsidiaries to its directors,  key managerial personnel’s or senior management, except who is part of promoter or promoter  group, provided that the same is not material in terms of the provisions of Regulation 23 of the  Listing Regulations.  
  8. Transactions which are in the nature of payment of statutory dues, statutory fees or statutory  charges entered between an entity on one hand and the Central Government or any other State  Government or any combination thereof on the other hand 
  9. Members of the Audit Committee, who are independent directors, shall alone approve Related Party Transactions. 
  10. The Audit Committee, at the time of approval of RPTs, shall take into consideration the certificate to  be placed before it by the Chief Executive Officer or Chief Financial Officer or any other KMP of the  Company and Every Promoter Director of the Company:
    1. confirming that the RPT(s) to be entered into are not prejudicial to the interest of public shareholders  of the Company; 
    2. the terms and conditions of the proposed RPT(s) are not unfavourable to the Company, compared to  terms and conditions, had similar transaction(s) been entered into with an unrelated party. This  certificate shall be placed before the Committee in terms of the Industry Standards; 
  11. Omnibus Approval by the Audit Committee 
    The Company may obtain omnibus approval from the Audit Committee for all Related Party  Transactions subject to compliance with the conditions as prescribed below:  
  12. The Audit Committee may grant an Omnibus approval for the Related Party Transaction proposed to  be entered into by the Company or its subsidiary subject to Compliance with the Companies Act, 2013  and SEBI Listing Regulations as amended from time to time. 
  13. The Audit Committee shall specify the criteria for granting the omnibus approval which shall include  the following conditions:
    1. maximum value of the transactions, in aggregate, which can be allowed under omnibus  route in a year; 
    2. the maximum value per transaction which can be allowed;
    3. extant and manner of disclosures to be made to the Audit Committee at the time of  seeking omnibus approval; 
    4. review, at such intervals as the Audit Committee may deem fit, Related Party  Transactions entered by the Company pursuant to the each of the omnibus approval  made;  
    5. transactions which cannot be subject to the omnibus approval by the Audit Committee. 
  14. The Company shall place the following information / documents before the Committee for its  consideration of request for omnibus approval of Related Party Transactions specifying the following:
    1. Name of the Related Party, Nature of the transaction, Period of the transaction and Maximum  amount of the transactions that can be entered into  
    2. Indicative base price / current contracted price and formula for variation in price, if any  c. Minimum information to be placed before the Audit Committee as required under the  Industry Standards  
    3. Such other conditions as the Audit Committee may deem fit. 
  15. Provided that where the need for Related Party Transactions 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.  
  16. The Audit Committee shall review, at least on a quarterly basis, the aggregated value and  other details of Related Party Transactions entered into by the Company pursuant to the  omnibus approval given;  
  17. Such omnibus approval shall be valid for a period not exceeding one year and shall require  fresh approval after expiry of one year.  

4.2 Approval of Board of Directors  

The following transactions shall require approval of the Board:  

  1. All transactions with Related Parties specified under Section 188 of the Companies Act, which  are not in ordinary course of business or not at arm’s length, or both. 
  2. All transactions with Related Parties which are required to be placed before the shareholders for  approval under the Companies Act, 2013 or the SEBI Listing Regulations. 
  3. The Company may, if it considers necessary and shall if the Audit Committee or Board so requires,  seek external professional opinion to determine whether an RPT is in the ordinary course of business  and/ or at arms’ length 
  4. In additional to the above, the following kinds of transactions with the related parties are also placed  before the Board for its approval:
    1. Transactions which may be in the ordinary course of business and at arm’s length basis, but which, as  per the Policy determined by the Board from time to time (i.e. value threshold and/or other parameters)  require Board approval in addition to Audit Committee approval; 
    2. Transactions in respect of which the Audit Committee is unable to determine whether or not they are  in the ordinary course of business and/or at arm’s length basis and decides to refer the same to the  Board for approval; 
    3. Transactions which are in the ordinary course of business and at arm’s length basis, but which in Audit  Committee’s view requires Board approval. 
  5. 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 and voting on the subject matter of the resolution  relating to such RPT.  

4.3 Approval of Shareholders  

All Material Related Party Transactions and subsequent Material Modifications shall require prior  approval of the Shareholders of the Company by way of a resolution passed at the general meeting of  the Company; and no related party shall vote to approve such resolutions whether the entity is a party  to the particular transaction or not.  

In addition to the above, all kinds of transactions specified under Section 188 of the Act which 

(a) are not at arm’s length or not in the ordinary course of business; and  

(b) exceed the thresholds laid down in Companies (Meetings of Board and its Powers) Rules,  2014 are placed before the shareholders for its approval.  

Further, the information as prescribed under the Companies Act, 2013 and/or the SEBI Listing  Regulations and/or Industry Standards, from time to time shall be provided in the Notice to the  shareholders for consideration of RPTs.  

However, the requirement of shareholders’ prior approval for Material Related Party Transactions shall  not be applicable for the following cases:  

  1. transactions in respect of a resolution plan approved under section 31 of the Insolvency and  Bankruptcy Code (IBC) 2016, subject to the event being disclosed to recognized stock  exchange within one day of the resolution plan being approved. 
  2. Related Party Transactions, where the listed subsidiary of the Company is a party, but the  Company is not a party, and if Regulation 23 and Regulation 15(2) of SEBI Listing Regulations  are applicable to such listed subsidiary. 
  3. Related Party Transactions of unlisted subsidiaries of the listed subsidiary of the Company,  where the prior approval of the shareholders of the listed subsidiary is obtained.
    1. transactions entered into between the Company and its wholly owned subsidiary whose  accounts are consolidated with the Company and placed before the shareholders at the general  meeting for approval.  
    2. transactions entered into between two wholly-owned subsidiaries of the Company, whose  accounts are consolidated with the Company and placed before the shareholders at the general  meeting for approval.  

4.4 Decision regarding transaction in ordinary course of business and on arm’s length basis  

The Audit Committee or the Board shall, in respect of the related party transactions referred to them  for approval, shall after considering the materials placed before them, judge if the transaction is in the  ordinary course of business or at arm’s length basis. In case the Audit Committee is not able to arrive  at such a decision, the same shall be referred to the Board, which shall decide if the transaction is the  ordinary course of business or at arm’s length basis. In case the Board is not able to arrive at such a  decision, the same shall be decided by the Independent Directors, whose decision shall be final.  

Section 188 (1) (b) of the Act defines “arm’s length” transaction as a transaction between two related  parties that is conducted as if they were unrelated, so that there is no conflict of interest.  

The methodology that has been adopted in the past and accepted by the Income tax authorities can be  used for determining the arm’s length price of the transaction.

5. Materiality of related party transaction

Regulation 23 of SEBI Listing Regulations requires a Company to provide materiality thresholds for  transactions with its related party. If a Related Party Transaction (“RPT”) exceeds the materiality  threshold, prior approval of the shareholders of the Company will be required through an ordinary  resolution. Prior approval of shareholders is also required in case of any subsequent material  modifications to these already approved Related Party Transactions.  

None of the related parties (“RPs”) of the Company shall vote to approve on such resolution  irrespective of whether the entity is a related party to the particular transaction or not (RP’s can vote  against the resolution seeking approval of material RPT(s)).  

The Company has fixed the following threshold limits for Materiality Related Party Transaction for  the purpose of Regulation 23 of SEBI Listing Regulations:  

  1. Payment to a Related Party with respect to brand usage or royalty – 5% of the annual  consolidated turnover of the Company as per its last audited financial statements; 
  2. Other transactions with a Related Party – lower of Rs. 1,000 crore or 10% of the  consolidated annual turnover of the Company as per its last audited consolidated financial  statements.  

6. Deemed Approval

The transactions or arrangements which are specifically dealt under the separate provisions of the law  and executed under separate approvals/procedures from the relevant committee, shall be deemed to  be approved for the purpose of this Policy.  

Such transactions may include:  

a) Appointment and payment of remuneration, including any variations thereto, to Key Managerial  Personnel pursuant to the Nomination and Remuneration Committee approval;  b) Payment of remuneration, fees, commission, etc. to directors pursuant to approval of the  Nomination and Remuneration Committee;  

c) Payments made to/received from Directors or Key Managerial Personnel pursuant to share based  incentive plans as approved by shareholders.  

d) Any benefits, interest arising to Related Party solely from the ownership of Company shares at  par with other holders, for example, dividends, right issues, stock split or bonus shares approved  by the Nomination and Remuneration Committee or any other Board composed committee.  

e) Contribution with respect to Corporate Social Responsibility to eligible entity pursuant to approval  of Board or the Corporate Social Responsibility Committee.  

7. Disclosures

  1. The Company shall disclose, in the Board’s report, transactions prescribed in Section 188(1) of  the Act with related parties, which are not in ordinary course of business or not at arm’s length  basis along with the justification for entering into such transaction.  
  2. The Company shall place all the information, as specified in Industry Standards read with the  provisions of SEBI Listing Regulations, Companies Act, 2013 as well as additional information  specified by SEBI from time to time, for review of the Audit Committee while seeking prior  approval of the RPTs.  
  3. The Company shall place all the information, as specified in Industry Standards read with the  provisions of SEBI Listing Regulations, Companies Act, 2013 as well as additional information  specified by SEBI from time to time, in the Statement to the notice being sent to shareholders  seeking their approval for proposed RPTs as applicable.  
  4. The Company shall provide disclosure of the Related Party Transactions to stock exchanges where  the Company’s securities are listed, in the format as specified by the SEBI/stock exchanges from  time to time and within statutory timelines. The Company shall simultaneously upload the  disclosure at its website.

8. Ratification of the Related Party Transaction

The members of the Audit Committee, who are independent directors, may ratify related party  transactions within three months from the date of the transaction or in the immediate next meeting of  the Audit Committee, whichever is earlier, subject to the following conditions:  

  1. the value of the ratified transaction(s) with a related party, whether entered into  individually or taken together, during a financial year does not exceed rupees one crore;  ii. the transaction is not material in terms of the provisions of Regulation 23(1) of SEBI  Listing Regulations; 
  2. the rationale for the inability to seek prior approval for the transaction shall be placed  before the Audit Committee at the time of seeking ratification;  
  3. the details of ratification shall be disclosed along with the disclosures of related party  transactions in terms of the Regulation 23(9) of SEBI Listing Regulations;  
  4. any other condition as specified by the Audit Committee  

The failure to seek ratification of the Audit Committee shall render the transaction voidable at the  option of the Audit Committee and if the transaction is with a party related to any director, key  managerial personnel and promoters, or is authorised by any other director, key managerial personnel  and promoters, the concerned director, key managerial personnel and promoters shall indemnify the  Company against any loss incurred by it. 

9. Amendments and Updation

The Audit Committee periodically shall review this Policy and may recommend amendments to this  Policy from time to time as it deems appropriate. In addition to guidelines for ongoing Related Party  Transactions, the Audit Committee may, as it deems appropriate and reasonable, establish from time  to time guidelines regarding the review of other Related Party Transactions. The Board shall have the  power to amend any of the provisions of this Policy, substitute any of the existing provisions with a  new provision or replace this Policy entirely with a new Policy. However, the Board shall review this  policy at least once in every three years.  

This Policy shall come into force with effect from the date of Board approval. 

10. Interpretations

Any words used in this Policy but not defined herein shall have the same meaning ascribed to it in  the Act or Rules made thereunder, SEBI Act or Rules and Regulations made thereunder, SEBI Listing  Regulations, Accounting Standards or any other relevant legislation / law applicable to the Company.  

This Policy is framed based on the provisions of the SEBI Listing Regulations and Section 188 of the  Act read with Rule 15 of Companies (Meetings of Board and its Powers) Rules, 2014. In case of any  subsequent changes in the provisions of the aforementioned statutes, the statutes would prevail over  the Policy and the provisions in the Policy would be modified in due course to make it consistent  with prevailing law. Any subsequent amendment/modification in SEBI Listing Regulations, Act  and/or applicable laws in this regard shall automatically apply to this Policy.