Hero MotoCorp Ltd. (hereinafter referred to as HMCL or the company) recognizes that Related Party Transactions can present potential or actual conflicts of interest and may raise questions about whether such transactions are consistent with the Company and its shareholders’ best interests and in compliance to the provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations).
The Board of Directors of the Company has adopted the following policy and procedures with regard to materiality of Related Party Transactions and also on dealing with them as defined below. The Audit Committee will review and may amend this policy from time to time subject to the approval of the Board.
The objective of this policy is to regulate transactions between the Company and its Related Parties based on the Companies Act 2013, Listing Regulations and other laws and regulations applicable to the Company.
"Act" means the Companies Act, 2013.
"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.
"Ordinary course of business" means the usual transactions, customs and practices undertaken by the Company to conduct its business operations and activities and includes all such activities which the company can undertake as per Memorandum & Articles of Association. The Board and Audit Committee may lay down principles for determining ordinary course of business in accordance with statutory requirements and other industry practices and guidelines.
"Company" means Hero MotoCorp Limited.
"Relative" with reference to a Director or KMP means the person as defined in Section 2(77) of the Act and rules prescribed thereunder.
"Related Party" means an individual, entity, firm, body corporate or person as defined in Section 2(76) of the Act, rules prescribed thereunder and Regulation 2(1)(zb) of Listing Regulations.
"Related party transaction" means a transfer of resources, services or obligations between the company and a related party, regardless of whether a price is charged, including but not limited to the following:
A transaction with a related party shall be construed to include a single transaction or a group of transactions in a contract. “Material Related Party Transaction” shall mean a transaction as defined in Regulation 23 of the Listing Regulations.
"Key Managerial Personnel" shall mean the officers/employees of the Company as defined in Section 2(51) of the Companies Act, 2013 and rules prescribed thereunder.
"Employees" shall mean the employees and office-bearers of the Company, including but not limited to Directors.
"Director" means a person as defined in Section 2(34) of the Companies Act, 2013.
"Audit Committee" means the Committee of the Board formed under section 177 of the Act and Regulation 18 of the Listing Regulations.
Any other term not defined herein shall have the same meaning as defined in the Companies Act, 2013, the Listing Regulations, Securities Contract Regulation Act or any other applicable regulation.
The new regime under Companies Act, 2013 and Listing Regulations covers in its ambit almost all the dealings and transactions with related parties. Any transfer of resources, services or obligations between the company and a related party, could get covered as a ‘related party transaction’, whether or not, there is an element of consideration, price or cash-flow.
Approval Process - Normal
Approval Process - Omnibus
The Audit Committee may grant omnibus approval for Related Party Transactions proposed to be entered into by the company subject to the following conditions:
The Company has laid out a robust framework to assess whether transactions with related parties are done on arm’s length basis. Globally accepted practices and principles have been incorporated in the framework. Tests to determine that transactions are in “ordinary course of business” and on an “arms’ length basis” are conducted on an ongoing basis.
Any officer or employee, can access/approach the vigil mechanism or Company Secretary to report a fraudulent related party transaction.
To review a Related Party Transaction, the Board/Audit Committee will be provided with all relevant material information of the Related Party Transaction, including the terms of the transaction, the business purpose of the transaction, the benefits to the Company and any other relevant matters. In determining whether to approve or a Related Party Transaction, the Board/Committee will consider the following factors, among others, to the extent relevant to the Related Party Transaction:
In the event the Company becomes aware of a transaction with a related party that has not been approved in accordance with this Policy prior to its consummation, the matter shall be reviewed by the Audit Committee. The Audit Committee shall consider all the relevant facts and circumstances regarding the related party transaction, and shall evaluate all options available to the Company, including ratification, revision or termination of the related party transaction. The Audit Committee shall also examine the facts and circumstances pertaining to the failure of reporting such related party transaction to the Audit Committee under this Policy and failure of the internal control systems, and shall take any such action it deems appropriate.
In any case where either the Board/Committee determines not to ratify a Related Party Transaction that has been commenced without approval, the Board/Committee, as appropriate, may direct additional actions including, but not limited to, immediate discontinuation or rescission of the transaction, or modification of the transaction to make it acceptable for ratification. In connection with any review of a Related Party Transaction, the Board/Committee has authority to modify or waive any procedural requirements of this Policy.
Non-compliance of this Policy may lead to initiation of disciplinary proceedings against the Employee/Director. Details of such disciplinary proceedings will form part of the personal file of such personnel and will be considered as a default on his or her key responsibilities.
The above would be over and above the prescribed penal consequences under Companies Act and Listing Regulations.
In the event of any conflict between the provisions of this Policy and of the Act or Listing Regulations or any other statutory enactments, rules, the provisions of such Act or Listing Regulations or statutory enactments, rules shall prevail over this Policy. Any subsequent amendment / modification in the Listing Regulations, Act and/or applicable laws in this regard shall automatically apply to this Policy.