|Policy on Materiality of Related Party Transactions and Dealing with Related Party Transactions|
DR. REDDY’S LABORATORIES LIMITED
POLICY ON MATERIALITY OF RELATED PARTY TRANSACTIONS AND DEALING WITH RELATED PARTY TRANSACTIONS
This policy is intended to ensure proper approval and reporting of transactions between Dr. Reddy’s Laboratories Limited (the “Company” or “Dr. Reddy’s”), its Indian subsidiary companies and its associate companies (together “the Group”) and the Related Parties in terms of the applicable laws and regulations.
Related Party Transactions have been one of the major areas of focus for the corporate governance reforms being initiated by the Indian legislature.
The changes introduced in the Corporate Governance norms through the Companies Act, 2013 and Clause 49 of the Listing Agreement (as applicable) require the companies to have enhanced transparency and due process for apprsoval of the Related Party Transactions.
One such requirement is that the companies are required to formulate a policy on ‘Materiality of Related Party Transactions and also on dealing with Related Party Transactions’.
The Board of Directors (the “Board”) of Dr. Reddy’s has adopted Related Party Transactions Policy (this “Policy”) to set forth the procedures under which the transactions with Related Parties shall be considered for approval/ratification.
“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.
“Audit Committee” means the audit committee constituted by the Board of Directors of the Company in accordance with applicable law, including the Listing Agreement and the Companies Act, 2013.
“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.
“Board” means the Board of Directors of Dr. Reddy’s Laboratories Limited.
“Company” means Dr. Reddy’s Laboratories Limited.
“Key Managerial Personnel (KMP)” means key managerial personnel as defined under the Companies Act, 2013, viz
“Material Related Party Transaction” means a transaction with a Related Party where the transaction/transactions to be entered into individually or taken together with previous transactions with a Related Party during a financial year, exceeds the thresholds as defined under the Companies Act, 2013 or Clause 49 of the Listing Agreeme
“Ordinary Course of Business” for the purpose of this policy will cover the businesses of Dr. Reddy’s & its ‘Group’, usual transactions, customs and practices of a business including incidental and/or facilitative activities of the business of Dr. Reddy’s and its ‘Group’. The following factors have been considered for determination of whether the transactions are in ordinary course of business:
“Policy” means this Policy, as amended from time to time.
“Related Party” in relation to the Company means a party related with the Company in any of the ways as are laid down in section 2(76) of the Companies Act, 2013 or Clause 49 of the Listing Agreement as amended from time to time and includes the following:
“Related Party Transaction” means any transaction directly/indirectly involving any Related Party which is a transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged.
"Relative” means relative as defined under the Companies Act, 2013 and includes any one who is related to another if
B) IDENTIFICATION OF POTENTIAL RELATED PARTY TRANSACTIONS
Every Director, Key Managerial Personnel and Management Council Member of the Company is responsible for providing notice to the Board or the Audit Committee, of any potential Related Party Transaction involving him/her or his/her relative, including any additional information about the transaction that the Board/Audit Committee may reasonably request. Board/Audit Committee will determine whether the transaction does, in fact, constitute a Related Party Transaction requiring compliance with this policy.
All Directors are required to declare and disclose their concerns or interests in any company or companies or bodies corporate at the first Board meeting in every financial year and subsequently whenever there is any change in disclosures. In addition, the Directors shall ensure that any business transactions entered into between Dr. Reddy’s and themselves comply with the terms of this Policy.
The Company 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.
C) REVIEW AND APPROVAL OF RELATED PARTY TRANSACTIONS
The Audit Committee is required to approve only related party transactions which are at arm’s length and in ordinary course of business. However, in case, there are any transactions which are not at arm’s length or which are concluded to be not in ordinary course of business, the Company would need the following additional approvals as mentioned hereunder:
In terms of the revised Clause 49 (VII)(E) of the Listing Agreement, the approval of the Audit Committee and the shareholders shall not be required for the transactions entered into between the Company and its wholly owned subsidiaries, whose accounts are consolidated with the Company and placed before the shareholders at the general meeting for approval.
Notwithstanding the foregoing, the following Related Party Transactions shall not require approval of Audit Committee or shareholders:
D) RELATED PARTY TRANSACTIONS NOT APPROVED UNDER THIS POLICY
In the event the Company becomes aware of any transaction with a Related Party that has not been approved under this Policy prior to its consummation, the matter shall be reviewed by the Committee. The Committee shall consider all the relevant facts and circumstances regarding the Related Party Transaction (including reasons of failure to report such transaction) and evaluate all options available to the Company, including ratification, revision or termination of the Related Party Transaction.
The Company shall make the following disclosures:
F) POLICY REVIEW
The Audit Committee may review this policy from time to time and recommend any changes to the Board for approval.