SEARCH
CONTACT US
+632 888-3055 +632 888-3955 CONTACT US
Corporate Governance > Company's Policies > Related Party Transaction Policy

Related Party Transaction Policy



(As amended by the Board of Directors on March 6, 2015)

 

1. Introduction


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).

 

 

2. Policy


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.

 

                               

3. Definitions

 

3.1 Related Parties

 

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.

 

  1. Parties that are members of the same group, i.e. each parent, subsidiary and fellow subsidiary is related to the others;

 

  1. 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;

 

  1. 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; and

 

  1. 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.

 

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

 

 

4. Identification, Review and Approval of Related Party Transactions

 

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.

 

The Independent Directors shall consider whether the terms of the RPT are arms’ length, fair to the Company and such factors as the following :

 

  • Materiality
  • Commercial reasonableness of the terms
  • Extent of the Related Party’s interest in the RPT; and
  • 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. 

 

 

 

5. Pre-Approved RPTs

 

5.1The following shall be deemed to be pre-approved by the Board in accordance with the Company’s Table of Authorities:

 

a.    Compensation and employment of executive officers and directors approved by the Compensation & Remuneration Committee;

b.    Transactions  with similar terms available to all employees generally;
c.     Charitable contributions by the Company where the Related Party is an employee or director, if the aggregate amount involved does not exceed P 1M;
d.    Banking-related services and transactions with a Related Party, if the terms are generally the same as or similar to offers of other banks in the ordinary course of business;
e.    Share transactions such as dividends, repurchase, rights offerings, available to all shareholders on a pro-rata ownership basis. 

 

 

6. Threshold  

 

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.

 

  • De minimis transaction, or aggregate of similar connected RPTs
    • Less than One percent (1%) of Total Assets of Parent or Subsidiary requires approval of the CEO or President;
    • One percent (1%) of Total Assets and above of Parent or Subsidiary requires approval of concerned entity’s Board of Directors.

 

 

  • Disclosure
  • o   Ten percent (10%) of Total Assets and above of Parent (SEC’s prescribed threshold level for materiality in financial statements reporting or disclosure)

 

 

  • Prior Shareholder Approval
    • 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. Disclosure

 

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.

 

 

8. Review


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

 

 

 

 

 

Related Party Transactions

of Parent or Subsidiary

Thresholds for Disclosure and Approval

( As amended by the Board of Directors on November 12, 2013)

   
   

 

 

 

Threshold

 

 
 

 

De minimis whether :

Transaction, or aggregate or similar connected

       Ongoing / continuing / recurring

        Non-recurring

    

     RPTs, is One percent (1%) of Total Assets

     and above of Parent or Subsidiary

     within a year, requires approval of

     concerned entity’s Board of Directors

 

(Note: similar connected RPTs agreed upon within a period of 12 months shall be aggregated and disqualified from de minimis treatment.)

    

 

 

 

 

Disclosure

Transaction is Ten percent (10%) of Total   

     Assets and above of Parent

 

      

       (Note: SEC prescribed threshold level

 

        for materiality in financial statements

 

        and required disclosure)

 

 

 

Prior Shareholder Approval Requirement

Transaction is Fifteen percent (15%) of Total     

 

      Assets and above of Parent or  

     Subsidiary

 

 

Exception : Sale/purchase of coal or power

 

in the ordinary course of business between

 

Parent or Subsidiary