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Related Party Transactions

Rationale

The Company, being part of an economic controlling group, inevitably conducts some of its business activities with Related Parties in the Group. This Policy sets out the guidelines, categories and thresholds requiring review, approval and ratification by the Company’s Board of Directors or Shareholders, and disclosure requirements for Related Party Transactions (RPTs).

It is the Company’s policy that any transaction with a Related Party will be at arms’ length and on terms generally available to an unaffiliated third party under the same or similar circumstances. There must be a compelling business reason to enter into such a related party transaction, taking into account such factors as expertise of related party, cost efficiency, among others. The Audit Committee as per its Board-approved Charter is tasked to oversee and review the propriety of RPTs and their required reporting disclosures.

 

Definitions

Related Party This emphasizes the substance of the relationship and not merely the legal form.

  1. Parties that are members of the same group, i.e. each parent, subsidiary and fellow subsidiary is related to the others;
  2. All Directors, Officers, Managers and Key Management Personnel having authority and responsibility for planning, directing and controlling the activities of the Company or its Subsidiary or its Parent, directly or indirectly; including companies they have control or joint control or significant influence in; 
  • Control – the power to govern the financial and operating policies of the Company or its Subsidiary.
  • Significant influence – the power to participate in the financial and operating policy decisions of the Company or its Subsidiary, but is not control over those policies. This may be gained by share ownership, statute or agreement. 
  1. Close family members of an individual referred to in ( b) above, who may be expected to influence, or be influenced by, that individual in their dealings with the Company or its Subsidiary;
  • Close family member – the individual’s spouse or domestic partner and children, stepchildren, and dependents of the individual or that individual’s spouse or domestic partner. 
  1. Co-Parties to joint ventures or associates of the same third party entered into by the Company or its Subsidiary;
  2. Party is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); Party is a joint venture or associate of a third entity;

Related Party Transaction (“RPT”)  is a transfer of resources, services or obligations between the Company & its Subsidiaries, and a related party, regardless of whether a price is charged.

Examples of RPTs are :

Guarantees or commitments to do something if a particular event occurs or does not occur in the future, including executory contracts (i.e. neither party has performed any obligation or both parties have partially performed their obligations to an equal extent)

  • Loans to directors
  • Sale or purchase of goods
  • Sale,  purchase  or lease of property and/or assets
  • Provision or receipt of services or leases
  • Assumption of financial/operating obligations
  • Subscription for debt or equity issuances
  • Establishment of joint venture entities
  • Settlement of liabilities on behalf of the Company or its Subsidiary or by the Company or its Subsidiary on behalf of a related party
  • Compensation, benefits (monetary and non-monetary), post-employment benefits, termination benefits and share-based payment of current employees

Material and/or Significant RPT is defined as those transactions with Related Party which involve an aggregate amount or value equal to or greater than Fifty Million Pesos (P50Million) over a twelve (12) month calendar year period.

 

Guidelines

  1. In the review and approval of RPT, the Company shall at all times abide by the following standards: (i) That the RPT is “fair and at arm’s length” and (ii) That the RPT is in the best interest of the Company and its stockholders, based under relevant circumstances.
  2. As matter of policy and procedure, all Material and/or Significant RPT shall be subject to review and endorsement by all the Independent Directors prior to approval by the Board.
  3. All Material and/or Significant RPT shall be reported by the Compliance Officer to the Audit Committee to ensure full and timely disclosure in the annual and quarterly reports to the Securities and Exchange Commission and in the Notes to the Financial Statements, whether on an interim or annual basis, as required under PAS 24 on Related Party Transaction Disclosures and other disclosure requirements.

 

Disclosure

RPTs that are required to be disclosed and reported in the Company’s filings with the Securities and Exchange Commission (SEC) shall be disclosed in accordance with laws, rules, regulations, Philippine Financial Reporting & Accounting Standards.

The Company shall comply with government required disclosures of relationships between the Company & its Subsidiaries irrespective of whether there have been transactions between them, transactions and outstanding balances, including commitments, in the consolidated and separate individual financial statements. It shall disclose the name of its parent, the ultimate controlling party and/or the most senior parent (defined as the first parent above the immediate parent) that produces consolidated financial statements available for public use.

All RPTs shall be disclosed to the Audit Committee and any material RPT shall be disclosed to the Board.

Review
This Policy will be reviewed as needed or at least annually by the Audit Committee.