Integrated Annual Report 2022/23

COMPLIANCE REPORT

Related Party Transactions Review Committee Report

Purpose of the Committee

Related Party Transactions Review Committee was established by the Board to ensure compliance with the rules and regulations governing Related Party Transactions for Listed Entities as per the requirement of Code of Best Practices on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka (the “Code”) and Section 9 of the Listing Rules of the Colombo Stock Exchange (the “Rules”).

The purpose of the Committee as set out in its Terms of Reference (TOR), is to conduct an appropriate review of company’s related party transactions and to ensure that
the Company complies with the rules set out in the Code. The primary objective of the rules is to ensure that the interests of the shareholders as a whole are considered when entering into related party transactions.

Composition

The Committee comprised of two (2) Independent Non-Executive Directors as of 31 March 2023 and is chaired by Mr Sanjay Kulatunga. Brief profiles of the members are given in the section on Prudent Corporate Governance of this Annual Report.

Company Secretaries, S.S.P. Corporate Services (Pvt) Ltd. act as the Secretary to the Related Party Transactions Review Committee.

Scope of the Committee

Scope of the Committee include the following:

  • Formulate and recommend a policy for adoption on related party transactions for the Group which is consistent with the Code whilst ensuring that related party transactions are transacted at arm’s length and are not prejudicial to the interests of the entity and its minority shareholders.
  • Review proposed Related Party Transactions of the Company other than those transactions which are explicitly exempted in the Listing Rules. Further seek information from Management regarding transactions that require immediate market disclosures as required by the Continuing Listing Requirements of the CSE.
  • Ensure that no Director of the Company shall participate in any discussion of a proposed related party transaction for which he is a related party, unless such Director is requested to do so by the Committee for the express purpose of providing information concerning the Related Party Transaction to the Committee.
  • Include appropriate disclosures on related party transactions in the Annual Report as required by the Continuing Listing Requirements of the CSE.
  • To monitor and recommend the acquisition or disposal of substantial assets between related parties, including obtaining independent advice from independent professional experts.

Meetings

The Related Party Transactions Review Committee convened 4 meetings during the financial year ended 31 March 2023 and the attendance of the members of the Related Party Transactions Review Committee was as follows:

27
April
2022		 26
July
2022		 27 October
2022		 25 January
2023		 Attendance
eligibility		 Attended
1. Mr Sanjay
Kulatunga 		4 4
2. Mr Harsha
Amarasekera 		4 4

Present – Excused

The Committee has reviewed the related party transactions during the financial year and has communicated its observations to the Board of Directors as per the CSE Listing Rules 9.3.2 (c).

The Group Chief Executive Officer, Chief Executive Officer – Freight and Logistics, Director – Group Finance, Manager – Treasury and Chief Financial Officer – Freight and Logistics also attended the meetings by invitation. The Company Secretary functions as the Secretary to the Related Party Transactions Review Committee.

Below table depicts the date of the meetings and the key areas of discussion;

Meeting date Key points of discussion
27 April 2022
  • Update on the Related Party Borrowings as of 27 April 2022. The Committee was informed on the loans repaid to the parent entity since the start of the 4th Quarter of FY 22. It was noted that the borrowing cost has increased due to higher funding cost.
  • The timing of future repayments was discussed. The Committee evaluated the facilities available globally to address Geo-political challenges. The mechanism of mobilising working capital for global requirements were revisited.
  • Discussion on the current Credit Facility with Parent entity to accommodate working capital requirements stemming from increase in business. Update on the current reserve position and the ability to accommodate dividends was discussed.
  • Update on the status of compliance required by Multinational Groups exceeding the respective threshold in line with OECD BEPS Action 13 requirements.
26 July 2022
  • Update on the Related Party Borrowings status as of 26 July was provided to the committee. The adequacy of the current funding lines available to the Group to meet future business requirements was discussed. The committee was also appraised on the steps taken to establish facility lines regionally to overcome the challenges in Sri Lanka.
  • Update was provided on Sri Lankas’ Transfer Pricing regulations and the necessary disclosures that must be made for companies exceeding the threshold.
  • Update on the Transfer Pricing study done for entities with strategic significance to the Group. Discussion on the approach taken to create a transfer pricing policy framework and establishing economic substance in these entities.
  • Update on the status of compliance required by Multinational Groups exceeding the respective threshold in line with OECD BEPS Action 13 requirements.
27 October 2022
  • Update on Related Party Borrowings as of 27 October 2022 and review of comparative funding rates. Discussion pertaining to the facility lines with financial institutions and the current outstanding.
  • Status update on conclusions reached pertaining to Transfer Pricing Compliance Requirements for local subsidiaries. The companies which were required to comply with the local transfer pricing compliance requirements had maintained required benchmarks to establish arm’s length principle.
  • Findings of the Initial study done for the Transfer Pricing model in Singapore was presented. The Committee also discussed the future steps required to complete the model.
  • Update on the status of compliance required by Multinational Groups exceeding the respective threshold in line with OECD BEPS Action 13 requirements.
25 January 2023
  • Update on Related Party Borrowings as of 25 January 2023. Committee was appraised on the borrowing being fully settled to the parent. It was noted that profit realisation and efficient collection of debtors resulted in settling the borrowings.
  • Discussion on the adequacy of credit facility lines with the Parent entity to cater to future business requirements. The committee evaluated the current requirement in line with the projected business and was given an update on the reserve position of the Group.
  • Status update on conclusions reached pertaining to Transfer Pricing Compliance Requirements for Subsidiaries globally. The companies which were required to comply with the local transfer pricing compliance requirements had maintained required benchmarks to establish arm’s length principles.
  • Update on the status of compliance required by Multinational Groups exceeding the respective threshold in line with OECD BEPS Action 13 requirements.

On behalf of the Related Party Transactions Review Committee

SANJAY KULATUNGA
Chairman
Related Party Transactions Review Committee

30 June 2023

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