Orchid Pharma : Download Policy on materiality and dealing with Related party transactions

Orchid Pharma Limited

Policy on Related Party Transactions and Material Related

Party Transactions

Orchid Pharma Limited

Policy on Related Party Transactions and Material Related

Party Transactions

Preamble

The Board of Directors (the "Board") of Orchid Pharma Limited (the "Company" or "Orchid") has adopted the following policy and procedures with regard to Related Party Transactions.

This policy will be applicable to all the related party transactions of the Company. This policy is to regulate transactions between the Company and its Related Parties in compliance with various provisions of the Companies Act, 2013 and the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. Further, Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 requires a Company to formulate a policy on materiality of Related Party Transactions and dealing with Related Party Transactions. This Policy on the Related Party Transactions (the "Policy") of the Company set forth the procedures to be followed for approval/ratification of Related Party Transactions in compliance with applicable laws and regulations.

Objective

This policy is framed as per the requirements of Regulation 23(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and in accordance with the provisions of the Companies Act, 2013 and is intended to ensure the proper approval and reporting of transactions between the Company and its Related Parties. Such transactions are appropriate only if they are in the best interest of the Company and its shareholders. The Objective of the Policy is to set out (a) the materiality thresholds for related party transactions and (b) the manner of dealing with the transactions between the Company and its related parties based on the Companies Act, 2013, Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and any other laws and regulations as may be applicable of the Company.

Definitions

The terms included in this Policy shall have the same meaning as defined under the Companies Act, 2013 read with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and/or other related laws, as amended and applicable from time to time.

"Act" shall mean the Companies Act 2013 and the Rules framed thereunder, including any modifications, amendments, clarifications, circulars or re-enactments thereof.

"Arm's Length basis" means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest. For determination of Arm's Length basis, guidance may be taken from provisions of Transfer Pricing under Income Tax Act, 1961.

"Associate Company" in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.

Explanation.-For the purpose of this clause,-

1. the expression "significant influence" means control of at least twenty percent of total voting power, or control of or participation in business decisions under an agreement;
2. the expression "joint venture" means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement;

"Audit Committee or Committee" means Committee of Board of Directors of the Company constituted under provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

"Board of Directors" or "Board" means Board of Directors of the Company, as constituted from time to time.

"Company "means "Orchid Pharma Limited"

"Key Managerial Personnel" means Key Managerial Personnel of the Company in terms of the Companies Act, 2013 and Rules made thereunder.

"Material Related Party Transaction" means a transaction with a related party if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the company as per the last audited financial statements of the company.

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 two percent of the annual consolidated turnover of the Company as per the last audited financial statements of the Company.

"Ordinary Course of business" means all such acts and transactions undertaken by the Company, including, but not limited to sale or purchase of goods, property or services, leases, transfers, providing of guarantees or collaterals,in the ordinary course of its trade or business

"Policy" means Related Party Transaction Policy.

"Related Party" means related party as defined under section 2 (1) (zb) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 2(76) of the Companies Act, 2013.

Any person or entity belonging to the Promoter or Promoter group of the listed entity and holding 20% or more of shareholding in the listed entity shall be deemed to be a related party.

"Related Party Transaction" means a transfer of resources, services or obligations between a listed entity 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 transaction in a contract. [Regulation 2(zc) of the SEBI (LODR) Regulations, 2015] and,

Pursuant to Section 188 of the Companies Act, 2013, Related Party Transactions mean, any contract or arrangement with a related party, with respect 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;
6. such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company; and
7. underwriting the subscription of any securities or derivatives thereof, of the company.

"Relative" means relative as defined under section 2(zd) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and section 2(77) under the Companies Act, 2013 and includes any one who is related to another, if-

1. i They are members of a Hindu undivided family ;

2. i . They are husband and wife ; or

i i i . A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:-

1. Father (including step-father)
2. Mother ( including step-mother)
3. Son ( including step-son)
4. Son's wife
5. Daughter
6. Daughter's husband
7. Brother ( including step-brother)
8. Sister (including step-sister)

Identification of Potential Related Party Transactions

Each Director and Key Managerial Personnel is responsible for providing notice to the Board 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. The Board/Audit Committee will determine whether the transaction does, in fact, constitute a Related Party Transaction 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. Interested Director(s) or KMP shall not be present at the meeting during discussions on the subject matter of the resolution(s).

Materiality thresholds

In accordance with Regulation 23 of the SEBI (LODR) Regulations, 2015, the Company has formulated this Policy on materiality of Related Party Transactions and on dealing with Related Party Transactions including clear threshold limits duly approved by the Board of Directors. The Listing Regulations requires a Company to provide materiality thresholds for transactions beyond which the Shareholders' approval will be required by way of a resolution. Orchid Pharma Limited has fixed its

materiality threshold at ten percent of the annual consolidated turnover of the Company as per the last Audited Financial Statements of the Company, for the purpose of Regulation 23 of the SEBI (LODR) Regulations, 2015. Further, all Material Related Party Transactions shall require approval of the shareholders through special resolution as per applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as may be amended from time to time and no related party shall vote to approve such resolutions whether the entity is a related party to the particular transaction or not.

Review and Approval of Related Party Transactions

Approval of Related Party Transactions by Audit Committee

All Related Party Transactions shall be placed before the Audit Committee for prior approval of the Audit Committee, as required under the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Any member of the Audit Committee who has a potential interest in any Related Party Transaction will abstain from discussion and voting on the approval of the Related Party Transaction. The Audit Committee shall determine whether the Transactions are on Arms' Length Basis and in Ordinary Course of Business, while providing its approval. If the Audit Committee determines that the Transactions are not on Arms' Length Basis or not in Ordinary Course of Business, or are "Material", or in any case requires the Board's approval, then it shall recommend such transactions to the Board for its approval. Further, if the Board determines that such transactions are "Material", as per the criteria mentioned above, then it shall recommend such transactions to the Shareholders of theCompany for their approval.

Omnibus approval

The Audit Committee may grant omnibus approval for Related Party Transactions proposed to be entered into with the Company which are repetitive in nature and are in the ordinary course of business and are on Arm's length basis, subject to compliance of the conditions contained in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and/or the provisions of the Companies Act, 2013.

Provided that where the need for related party transaction cannot be foreseen and requisite details are not available, Audit Committee may grant omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction. The 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 approvals given and such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year.

To review a Related Party Transaction, the Committee shall be provided with the necessary information, to the extent relevant, with respect to actual or potential Related Party Transactions and / or prescribed under the Companies Act, 2013 and Rules thereunder, and SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015. Any member of the Committee who has potential interest in any Related Party Transaction shall abstain from discussion and voting on the approval of the Related Party Transaction. SEBI (LODR) Regulations shall be applicable on all prospective Transactions.

In the event any contract or arrangement with a related party is not in the ordinary course of business or at arm's length, the Company shall comply with the provisions of the Companies Act 2013 and the Rules framed there under and obtain approval of the Board or its shareholders, as applicable, for such transaction/contract /arrangement.