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.
This Policy refers to the expanded definition of International Accounting Standard (IAS) 24 on Related Parties. The Standard emphasizes the substance of the relationship and not merely the legal form.
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.
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.
Post-employment benefit plan, and sponsoring employers of such a plan, of either the Company or an entity that is a related party of the Company.
3.2. Related Party Transaction is a transfer of resources, services or obligations between the Company & its Subsidiaries, and a related party, regardless of whether a price is charged.
4.1 Generally, Management promptly reports to the Board of Directors (Board) on the terms, business purpose, benefits and other details of each new, existing or proposed RPT for review and approval. The Board shall approve any RPT before its commencement. However, if the same is not identified beforehand, it must be subsequently reviewed and ratified by the Board.
4.2To determine whether RPTs are in the best interests of the Company and Shareholders, the Company’s Independent Directors are required to review material/significant RPTs that meet the threshold levels stipulated by regulatory rules and requirements on material RPTs, as well as prescribed guidelines per item 6 of this Policy.
Conflict of interest, actual or apparent, of the Related Party participating in the transaction.
4.3 The Audit Committee may establish guidelines to oversee conflicts of interest of Management, Board Directors and shareholders, including misuse of corporate assets and abuse in RPTs.
4.4 A Director, officer or key management personnel shall promptly notify the Audit Committee or the Company’s Corporate Counsel of any interest he or his immediate family member had, has or may have in a RPT. He shall disclose all material information concerning the RPT.
e. Share transactions such as dividends, repurchase, rights offerings, available to all shareholders on a pro-rata ownership basis.
The Company shall set thresholds and categories for Disclosure and Approval of RPTs. The aggregate amount of RPTs within any twelve (12) month period shall be considered for purposes of applying these thresholds.
One percent (1%) of Total Assets and above of Parent or Subsidiary requires approval of concerned entity’s Board of Directors.
Fifteen percent (15%) of Total Assets and above of Parent or Subsidiary.
Exception: Sale or purchase of coal in the ordinary course of business between Parent and its Subsidiaries.
7.1RPTs 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 IAS 24’s 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.
7.2 All RPTs shall be disclosed to the Audit Committee and any material RPT shall be disclosed to the Board.
This Policy will be reviewed as needed or at least annually by the Audit Committee.