Related Party Transactions Policy

Kinara Capital Private Limited (Formerly Known as Visage Holdings and Finance Private Limited) (“Company”) is a private limited company incorporated under the Companies Act, 1956. The Company is registered with the Reserve Bank of India as a Systemically Important Non-Deposit taking Non-Banking Finance Company (NBFC-ND-SI) and is engaged in the business of providing loans to MSME.

This policy on related party transactions (the “Policy”) has been framed in compliance with the provisions pertaining to related party transactions under the Companies Act, 2013 (the “Act”), the rules made thereunder and the applicable provisions of the Master Direction – Reserve Bank of India (Non-Banking Financial Company –Scale Based Regulation) Directions, 2023, (collectively, the “Applicable Law”).

The Board of Directors of the Company (the “Board”) has duly adopted the following Policy. The Audit committee and / or the Board, shall review the Policy on a periodic basis and may amend this policy from time to time, as required.

The Policy is aimed at setting out a governance framework for handling related party transactions of the Company in accordance with the Applicable Law. Related party transactions can sometimes present a potential or actual conflict of interest for the Company and therefore, the Company is required to procure necessary approvals before undertaking any such transactions and make relevant disclosures as prescribed under Applicable Law. This Policy, therefore, is intended to serve as a guidance document for all stakeholders in order to identify and benchmark transactions between the Company and its related parties and deal with such transactions in compliance with Applicable Law. Accordingly, related party transactions may be entered into by the Company only in accordance with this Policy, as amended from time to time.

The Scope of the Related Party Transaction covers below:

• Materiality thresholds for Related Party Transactions.
• Related Party Transactions carried out in the ordinary course of business and at arm’s length price.
• Related Party Transactions to be entered into by the Company, except inaccordance with the provisions of this RPT Policy.

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 and

1. As contracts or arrangements with respect to clauses (a) to (e) of sub-section (1) of section 188, with criteria as mentioned below –
   1. sale, purchase or supply of any goods or materials, directly or through appointment of agent amounting to ten per cent. or more of the turnover of the company, as mentioned in clause (a) and clause (e) respectively of sub-section (1) of section 188;
   2. selling or otherwise disposing of or buying property of any kind, directly or through appointment of agent, amounting to ten per cent. or more of net worth of the company, as mentioned in clause (b) and clause (e) respectively of sub-section (1) of section 188;
   3. leasing of property of any kind amounting to ten per cent or more of the turnover of the company, as mentioned in clause (c) of sub-section (1) of section 188;
   4. availing or rendering of any services, directly or through appointment of agent, amounting to ten per cent. or more of the turnover of the company, as mentioned in clause (d) and clause (e) respectively of sub-section (1) of section 188:
      
      Explanation. —It is hereby clarified that the limits specified in sub-clauses (i) to (iv) shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year.
      
      
2. is for appointment to any office or place of profit in the company, its subsidiary company or associate company at a monthly remuneration exceeding two and half lakh rupees as mentioned in clause (f) of subsection (1) of section 188; or
3. is for remuneration for underwriting the subscription of any securities or derivatives thereof, of the company exceeding one per cent. of the net worth as mentioned in clause (g) of sub-section (1) of section 188.

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 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.

Any other term not defined herein shall have the same meaning as defined in the Companies Act, 2013, or any other applicable law or regulation

A "transaction" with a related party shall be construed to include single transaction or a group of transactions in a contract."

Indian Accounting Standard (Ind AS) defines the term ‘related party transaction’ as a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

1. All related party transactions shall require prior approval of the Audit Committee. However, the Audit Committee may grant an omnibus approval for related party transactions proposed to be entered into by the Company subject to the following conditions:
   1. The Audit Committee shall, after obtaining approval from the board, lay down the criteria for granting the omnibus approval in line with this Policy in respect of transactions which are repetitive in nature;
   2. The Audit Committee satisfies itself about the need for such omnibus approval and that such approval is in the interest of the Company;
   3. Such omnibus approval shall specify
   1. the name/s of the related party, nature of transaction, period of transaction, maximum amount of transaction that can be entered into;
   2. the indicative base price/ current contracted price and the formula for variation in the price, if any; and
   3. such other conditions as the Audit Committee may deem fit.
2. Where the need for a related party transaction cannot be foreseen and aforesaid details are not available, the Audit Committee may grant omnibus approval for such transactions subject to their value not exceeding Rs. 1 crore per transaction.
3. Such omnibus approvals shall be valid for a period not exceeding 1 financial year and shall require fresh approvals after the expiry of such financial year.
4. An omnibus approval shall not be made for transactions in respect of selling or disposing of the undertaking of the Company and/or any other transaction the Audit Committee may deem not fit for omnibus approval.
5. Further, with respect to related party transactions between a holding company and its wholly owned subsidiary, the requirement for an audit committee approval shall apply only for such Transactions (as defined below) between the Company and its related parties as are contemplated under Section 188.

In addition to approval from the Audit Committee, the Company shall be required to obtain the prior approval of the Board for entering into any contract or arrangement with a related party with respect to the transactions mentioned in the table below (“Transactions”).

1. Where the Transactions exceed certain threshold limits as mentioned below (“Threshold Limits”), the consent of the shareholders by way of an ordinary resolution would also need to be obtained, in addition to approval from the Audit Committee and the Board.

2. The requirement for obtaining shareholders’ approval will not apply to Transactions entered into between the Company and its wholly owned subsidiary whose accounts are consolidated with that of the Company and placed before the shareholders at the general meeting for approval.
3. As a general exception, for Transactions which are entered into by the Company with its related parties in its ‘ordinary course of business’ and on an ‘arm’s length basis’, no approval of the Board or the shareholders would be required; however, the requirement of approval from the Audit Committee would continue to prevail
4. An arm’s length transaction is defined under the Act to mean a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.
5. In the absence of a concrete definition for the phrase ‘ordinary course of business’ under the Act, the following non-exhaustive factors may be considered to assess whether a Transaction falls under the ordinary course of business of the Company:
   • Whether the activity is covered in the objects clause of the Memorandum of Association;
   • Whether the activity is in furtherance of the business of the Company;
   • Whether the activity is normal or otherwise routine for the particular business undertaken by the Company;
   • Whether the activity is repetitive/frequent;
   • Whether the income, if any, earned from such activity/transaction is treated as business income in the Company’s books of accounts;
   • Whether the transactions are common in the particular industry the Company operates in;
   • Whether there is any historical practice to conduct such activities;
   • The financial scale of the activity with regard to the operations of the Company’s business;
   • Revenue generated by the activity; and
   • Resources committed to the activity.
     
     These are not exhaustive criteria, and the Company will have to assess each Transaction considering its specific nature and circumstances.
6. The Audit Committee shall test each related party transaction on materiality, arm’s length and ordinary course of business. The Audit Committee will be responsible for overall monitoring and supervision of the framework pertaining to related party transactions in the Company.

The approval mechanism set out in this Policy and the Act has been captured in a nutshell here in below:

In the event the Company becomes aware of any related party transaction involving an amount not exceeding INR 1 crore that has not been approved in accordance with this Policy prior to its consummation, the matter shall be reviewed by the Audit Committee, which shall, basis independent evaluation, ratify, revise, terminate or suggest such other options with respect to such related party transaction. If such transaction is not ratified by the Audit Committee within 3 months from the date of the transaction, such transaction shall be voidable at the option of the Audit Committee.

Where any contract or arrangement is entered into by a director or any other employee, without obtaining the consent of the Board or approval by a resolution in the general meeting and if it is not ratified by the Board or, as the case may be, by the shareholders at a meeting within three months from the date on which such contract or arrangement was entered into, such contract or arrangement shall be voidable at the option of the Board or, as the case may be, of the shareholders; and if the contract or arrangement is with a related party to any director, or is authorised by any other director, the directors concerned shall indemnify the company against any loss incurred by it.

The Company shall make the relevant disclosures with respect to the related party transactions of the Company in its Annual Report as per Paragraph A of Schedule V of the LODR Regulations and the Act as well as in the financial statements in accordance with the Act and the applicable accounting standards and maintain such registers as required under the provisions of the Act.

The CFO and the Company Secretary will prepare a management note with justification for entering into the contract/arrangement/transaction which will also include whether the transaction is in the ordinary course of business and at arm’s length.