1. [Section188 and Rule 15 of Companies (Meeting of Boards and its Powers) Rules, 2014] Applicable to both Private as well as Public Companies Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

2. Who is a Related Party?? Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

3. Related Party has been explained under section 2(76) of the Companies Act, 2013 which includes:- 1. A Director or his Relative 2. A Key Managerial Personnel 3. A firm in which Director, Manager or his Relative is a partner 4. A private company in which a director or manager 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% of its paid up capital 6. Any body corporate, whose BOD, MD or Manager is accustomed to act in accordance with the advice, direction or instruction of a Director or Manager given not in a Professional capacity. 7. Any person on whose direction or instruction or advice given not in any professional capacity, a Director or Manager is accustomed to act. 8. Any company which is the company’s holding company or co-subsidiary of that holding company or subsidiary or associate company.holding companysubsidiaryassociate company * Companies 1 st (Removal of Difficulties) Order, 2014 word “OR” replaced with word “AND” Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

4. The following person, with reference to a company as defined under Rule 3 of the Companies (Specification of Definitions of Details), Rules, 2014, shall also be deemed to be related party: I. A director or II. Key managerial person of the holding company of such company or III. Their relative shall be deemed to be related party. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

5. Who are Relatives ? Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

6. List of Relative Is defined under Section 2(77) of the Companies Act, 2013. Under Companies Act, 2013Under Companies Act 1956 Relative means anyone who is related to another person if they are:- a)members of a HUF b)Husband or Wife c)Related in any manner as prescribed in Companies (Specification of definitions details) Rules, 2014:- A person shall be deemed to be relative of another, if he /she is related to another in the following manner:- 1.Father (Includes Step father) 2.Mother (Includes Step Mother) 3.Son (Included Step Sun) 4.Son’s Wife 5.Daughter 6.Daughter’s Husband 7.Brother (Includes Step Brother) 8.Sister ( Includes Step Sister) The person defined as relative under the New companies act were also defined as relatives in the Old Act, however the following person who were included in the definition of the relatives under old act has been removed from the definition of relative under the New Act, namely: - 1.Father's father. 2.Father's mother. 3.Mother's mother. 4.Mother's father. 5.Son's son. 6.Son's wife. 7.Son's daughter. 8.Son's daughter's husband. 9.Daughter's son. 10.Daughter's son's wife. 11.Daughter's daughter. 12.Brother's wife. 13.Sister's husband Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

7. Concept of Related party widened Under the 1956 Act, restriction applied only to transaction with specified person/parties, namely: - 1. A director of the company or his relative 2. A firm in which such a director or relative is a partner, any other partner in such a firm 3. A private company of which the director is member or director. In contrast, section 188 of Companies Act, 2013 covers all the persons covered in the definition of the term, “Related Party”. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

8. Related Party Transaction Section 188 of the Companies Act, 2013 deals with certain transactions which requires Boards and Shareholders approval, which have been dealt in following slides: Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

9. Related Party Transaction Approvals ParticularBoard’s Approval Members Approval Sale purchase or supply of any goods or materials directly or through appointment of Agent RequireRequired if transaction value exceeds 10% of the turnover of the company or Rs. 100 crore, whichever is lower Selling or otherwise disposing of, or buying, property of any kind directly or through Agent RequireRequired if transaction value exceeds 10% of net worth of the company or Rs 100 crore, whichever is lower Leasing of property of any kindRequireRequires if transaction value exceeds 10% of the net worth of the company or 10% of turnover of the company or Rs 100 crore, whichever is lower Availing or rendering of any services directly or through appointment of Agent RequireRequires if transaction value exceeds 10% of the turnover of the company or Rs. 50 crore, whichever is lower Explanation: it is hereby clarified that the limits specified above shall apply for transaction to be entered into either individually or taken together with the previous transaction during a financial year. Required if transaction value exceeds 25% of the turnover of the company Required if transaction value exceeds 10% of the net worth of the Company. If Transaction was before August, 2014 Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

10. Related Party Transaction Approvals (in Continuation..) ParticularsBoard Approval Members Approval Underwriting the subscription of any security or derivatives thereof. RequireRequired if exceeding 1% of the Net worth Appointment of any office or place or place of profit in the company or its subsidiary or associate company.office or place or place of profit RequireRequires if monthly remuneration of such related party exceeds Rs. 2,50,000 Explanation: - (1) The Turnover or Net Worth referred in the above sub-rules shall be computed on the basis of the Audited Financial Statement of the preceding financial year. (2) In case of a wholly owned subsidiary, the Special Resolution passed by the holding company shall be sufficient for the purpose of entering into the transactions between the wholly owned subsidiary and the holding company. Non Applicability of the Section If the Transaction are on or after May 21, 2015, Ordinary Resolution is required. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

11. Provided that no contract or arrangement, in the case of a company having a paid up share capital of not less than such amount, or transactions not exceeding such sums, as may be prescribed, shall be entered into except with the prior approval of the company by a Special resolution: Provided further that no member of the company shall vote on such special resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party: Provided also that nothing in this sub-section shall apply to any transaction entered into by the company in its ordinary course of business other than transactions which are not on an arm’s length basis. Provided also that the requirement of passing the resolution under first proviso shall not be applicable for transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. Ordinary w.e.f. 25 th May 2015 Provided further that no member of the company (Other than Private Company) shall vote on such Ordinary resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party. w.e.f. 5 th June 2015 Proviso to the scope of related parties Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

12. Office or Place of Profit Office or Place of Profit means any office or place: - which is held by a director, where 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. 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. Example: 1. If a Director of a company is being provided a rent free accommodation from the side of the company which is not a part of his/her usual salary package then such transaction will be covered under office or place of profit. 2. If a relative of a Director or KMP is being provided a favour from the side of the company which is beyond the perquisites being offered to the Director under the usual term will fall under this category. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

13. Disclosure of interest by Director: [Section 184(1)] Every Director shall: At the 1 st meeting of the Board after incorporation of the company; At the 1 st meeting of the Board after his appointment; At the 1 st meeting of the Board in every financial year; When there is any change in the disclosure already made, then at the 1 st meeting held after such change, shall Disclose his concern or interest in any: Company or Companies; Bodies corporate; Firms or other association of individual; Change in his Shareholding. Director shall disclose his concern or interest by giving a notice in writing in Form No MBP-1 within 30 days of from the date of his appointment or change in interest. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

14. Disclosure of interest by Director Every Director of a Company who in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into – (a) with a body corporate in which such director or in association with any other director holds more than 2% shareholding of that body corporate OR is a promoter, manager, CEO of that body corporate OR (b) With a firm or other entity in which, such director is a partner, owner or member, as the case may be, Shall disclose the nature of his concern or interest at the meeting of the Board in which such contract is discussed and shall not participate in such meeting. [Section 184(2)] Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

15. No need to pass ordinary resolution for transactions entered into between holding company and wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. Contracts entered into as per section 297 of Companies Act, 1956 shall not be required for fresh approval under the provisions of section 188. However, if any change in contract is made on or after April 1, 2014, section 188 of Companies Act, 2013 will be attracted and applied. No need of any approval if the related party transaction is at arm length basis in the ordinary course of business. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

16. Contract Voidable if approval of Board / Member is not taken When a director or any employee enters into any contract, without obtaining the consent of BOD or approval by Special Resolution and if it is not ratified by the Boards/Shareholders within 3 months from the date on which such contract was entered into, such contract shall be voidable at the option of the Board. If the contract or arrangement is with a related party to any other director, or is authorized by any other director, the director concerned shall indemnify the company against loss incurred by it. [Section 188(3)] Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

17. Penalty It shall be open to the company to proceed against a director or any other employee who had entered into contract or arrangement in contravention of the provisions of this section for recovery of any loss sustained by it as a result of such contract or arrangement. [Section 188(4)] Any Director or an employee who had entered into or authorized the contract or arrangement with a related party in violation of the provisions of this section shall be punishable:- 1. In case of Listed Company :- Imprisonment up to 1 year or Fine of Rs. 25,000 up to Rs. 5 lakh or both 2. In case of any other company :- Fine of Rs. 25,000 up to Rs. 5 lakh. [Section 188(5)] Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

18. Associate Company Company in which another company has a significant influence, but which is not a subsidiary company. Note: Significant Influence means control of at least 20% of Total Share Capital or of business decision. Key Features: a) Associate company will now be considered as ‘Related Party’. b) Any Director concerned/interested in associate companies, will not be regarded as Independent Director. c) Any Auditor holding any Security or is indebted to or has as business relation with Associate Company, cannot be appointed as the Auditor of the Company. d) Annual Return shall contain particulars of Associate companies. e) Register of Director/KMP shall include the details of securities held by tem in the company or its holding, subsidiary, subsidiary of company’s holding company or Associate Companies. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

19. Holding Company Holding company means a company which : - 1. Controls the composition of the Boards of Directors OR 2. Exercise or control more than 50% of the Total share capital either at its own or together with one or more of its subsidiary companies. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

20. Subsidiary Company Subsidiary company, in relation to any other company(that is to say Holding company), means a company in which the holding company :- A). Controls the composition of the Boards of director OR B). Exercise or control more than 50% of the Total share capital either at its own or together with one or more of its subsidiary companies. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

21. Approval of Audit Committee ( u/s 177) Applicability of Audit Committee: - Following companies are required to constitute an Audit committee: - 1. Every Listed Company 2. All Public companies with a paid-up capital of Rs. 10 crores or more; 3. All public companies having turnover of Rs. 100 crore or more; 4. All public companies having in aggregate, Outstanding loans or borrowings or debenture or deposits exceeding Rs. 50 crore or more. Requirement: - As per the provisions of section 177(4)(iv), every Related party transactions and subsequent modification in any previous transaction will require prior approval of Audit Committee. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

22. Details of Related party transactions to be filed with ROC A) Details of material contracts or arrangements or transactions at arm’s length basis: 1. Name(s) of the related party and nature of relationship 2. Nature of contracts, arrangements, transactions 3. Duration of the contracts, arrangements, transactions 4. Salient terms of the contracts, arrangements or transactions including the value, if any 5. Date(s) of approval by the board 6. Amount paid as advances, if any B) Details of contracts or arrangements or transactions not at arm’s length basis: 1. In addition to the above, date on which the special resolution was passed in general meeting, and 2. Justification for entering into such contracts, arrangements or transactions Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

23. Implications of revised clause 49 of Listing Agreement in terms of Related Party Transactions The Company shall frame and adopt a policy on materiality of related party transactions and dealing with related party transactions. The same shall be filed with the stock exchanges and also be updated in the Company’s website. Further the company shall include the policy in its Annual Report every year. Any related party transactions irrespective of transactional values requires the prior approval of Audit Committee. The company shall have a periodical review of the related parties and the transactions entered or to be entered into with the related parties. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

24. Requirement for Listed Companies Prior approval of shareholders required for all Material related party transactions Policy of dealing with Related party transactions to be disclosed on website and in annual report. Details of all “Material Transactions” with related parties shall be disclosed quarterly along with the compliance report on corporate governance. Material Transaction: Transaction (together with previous transactions with a related party) exceeds 10% of the annual turnover; or exceeds 20% of the net worth of the company as per last year’s audited financials Material Transaction: Transaction (together with previous transaction with a related party) exceeds 10% of the turn over as per last year’s audited financials. w.e.f. September 15, 2014 Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com

25. Thank You.. Venky Rathi Mob: 8802239807 E-mail: rathi.venky@gmail.com