Related Party Transaction Policy
1.Purpose & Scope
Welcome to Nairtime Nigeria’s Related Party Transaction Policy.
This Policy sets out the policies governing the treatment of Related Party Transactions (“RPT”) by the employees of the Nairtime Group. It provides guidance on the nature and extent of any transactions or presently which are material to the company or the related party, and any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets, to which the company or any of its parent or subsidiaries was a party.
Moreover, this Policy provides guidance on outstanding loans (including guarantees of any kind) made by the Group to or for the benefit of any of the persons identified as Related Parties (“RP”).
This policy applies to Nairtime and each of its subsidiaries. Accordingly, this Plan will refer to Nairtime Group and its subsidiaries as “Nairtime”, the “Group” or the “Company”.
It will be communicated to all stakeholders and employees, as well as relevant third parties and other necessary individuals and entities. The purpose of this policy is to provide guidance provided on IAS24 – Related Parties and documents the Company’s key considerations and conclusions with respect to their identification of Nairtime RPs.
1.1.Amendments
Any amendment of these processes and procedures may be made only by Board of Directors. This charter may be amended by the Board at its sole discretion without prior notification.
Any such waiver shall be disclosed to the extent and in the manner required by applicable international governance standards and applicable Accounting Standards.
2. Guiding Principles
This Policy is intended to provide guidance on related parties, including the identification of RPs, the disclosure of RP relationships, and the disclosure of information about transactions and balances between Nairtime and its RP in relevant circumstances.
All reports and financial statements must contain the disclosures necessary to draw attention to the possibility that its financial position may have been affected by RPs/RPTs and the outstanding balances pertaining to the same. The principal issues in disclosing information about RPs are:
1) identifying which parties control or significantly influence the Company, and
2) determining what information should be disclosed about transactions with those RPs.
Accountability: Disclosure of relevant RP relationships, RPTs and the relationships underlying those transactions allows users to better understand Company reports and financial statements because:
1) RP relationships can influence the way in which an entity co-operates with other entities in achieving its individual objectives, and common or collective objectives;
2) RP relationships might expose an entity to risks, or provide opportunities that would not have existed in the absence of the relationship; and
3) RP may enter into transactions that unrelated parties would not, or may agree to transactions under different conditions than those that would normally be available to unrelated parties.
Advantage Symmetry: The existence of RP relationships means that one party can control or significantly influence the activities of another. This creates opportunities for transactions to occur under conditions that advantage one party inappropriately at the expense of another.
- Oversight: the supervision of the activities of an entity, with the authority and responsibility to control, or exercise significant influence over, the financial and operating decisions of the entity.
- Significant Influence: the power to participate in the financial and operating policy decisions of an entity, but not control those policies. For the purposes of this Policy, significant influence encompasses entities subject to joint control.
Transparency: Disclosure of relevant RPTs that occur, and their governing conditions, allows users to assess the impact of those transactions on the financial position and performance of the Company, and its ability to deliver agreed services.
Materiality: The materiality of an item is determined with reference to the nature or size of that item. When assessing RPT materiality, the nature of the RP relationship and the nature of the transaction, may mean that a transaction is material regardless of its size.
2.1.Accounting Treatment
Financial assets are classified, at initial recognition as financial assets carried at fair value through profit or loss, fair value through other comprehensive income or amortized cost.
- Assets comprise trade and other receivables, other contract assets, long term deposits, due from RPs and cash in hand and at bank.
- Liabilities include trade and other payables, loans from RPs, short term borrowings, lease liabilities, dues to RPs and dividend payable.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in the consolidated statement of profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets are classified at amortised cost, which includes trade and other receivables, other contract assets, long term deposits, due from related parties and bank balances and cash.
3. Related Parties
RPs include shareholders, entities controlled by the shareholders with significant interests, directors and Company key management personnel (KMP) and close family members of such individuals. If the Company in the normal course of business carries out transactions with other business entities that fall within the definition of a RP, the transaction(s) must be carried out at mutually agreed and mutually beneficial terms.
For the purposes of this Policy, parties are considered related if:
1) one party has the ability to:
a) control the other party, or
b) exercise significant influence over the other party in financial and operating decisions, or
2) Both parties are subject to common control.
The following are deemed not to be RPs:
1) Providers of finance (in the ordinary course of their business) and Trade unions; and
2) An entity with which the relationship is solely that of an agency.
The definition of RPs, for this Policy, includes:
1) Entities controlled, directly or indirectly, by the Company;
2) Individuals owning, directly or indirectly, an interest in the Company that gives them significant influence over the Company, and close family members of such individuals;
3) Entities owned by Company Key Management Personnel (KMP), major shareholders and close family members of such individuals,
4) Entities in which a substantial ownership interest is held, directly or indirectly, by any person described or included in item 3, or over which such a person is able to exercise significant influence.
5) Entities in which any person described in item 3 can, directly or indirectly, exercise significant influence through their voting power rights.
4. Related Party Relationships
In considering each possible RP relationship, attention is directed to the substance of the relationship, and not merely the legal form. Where two entities share a member of KMP, it is necessary to consider the possibility and likelihood, that this person would be able to affect the policies of both entities in their mutual dealings. However, the mere fact that there is shared KMP does not automatically create a RP relationship.
RP relationships may arise when an individual is either a Board Member or is involved in the financial and operating decisions of the Company. RP relationships may also arise through external operating relationships between the Company and the RP; such relationships will often involve a degree of economic dependency.
Economic Dependency: where one entity is dependent on another for a significant portion of its funding or revenues, would on its own be unlikely to lead to control or significant influence and is therefore unlikely to give rise to a RP relationship. As such, any single customer, supplier, franchisor, distributor, or general agent with which the Company transacts a significant volume of business will not be a RP merely from the resulting economic dependency.
However, economic dependency, together with other factors, may give rise to significant influence, and therefore a RP relationship. Judgment is required in assessing the impact of economic dependence on a relationship. Where the Company is economically dependent on another entity, the Company must encouraged disclose that dependency.
4.1.Disclosures
RP relationships where control exists shall be disclosed, irrespective of whether there have been transactions between the related parties. For a reader of financial statements to form a view about the effects of RP relationships on the Company, it is appropriate to disclose RP relationships where control exists, irrespective of whether there have been any RPTs in the period. This would involve the disclosure of the names of any controlled entities, the name of the immediate controlling entity, and the name of the ultimate controlling entity, if any.
5. Related Party Transactions
Related party transaction is a transfer of resources or obligations between related parties, regardless of whether a price is charged. Related party transactions exclude transactions with any other entity that is a related party solely because of its economic dependence on the reporting entity or the government of which it forms part.
5.1.Disclosures
In respect of RPTs, other than transactions that would occur within a normal supplier-client relationship under terms no more or less favorable than those which would have been reasonably expected for the Company to adopt if dealing a non-related entity, the Company shall disclose:
1) The balance outstanding from or to the related party at the year-end;
2) The nature of the related party relationships;
RPT information that needs to be disclosed to meet the objectives of general-purpose financial reporting would normally include:
1) The balance outstanding from or to the related party at the year-end;
2) A description of the nature of the relationship between the RPs involved in these transactions
Items of a similar nature may be disclosed in aggregate, except when separate disclosure is necessary to provide relevant and reliable information for decision-making and accountability purposes.
Disclosure of RPT between members of an economic entity is unnecessary in consolidated financial statements, because consolidated financial statements present information about the controlling entity and controlled entities as a single reporting entity. RPTs that occur between entities within an economic entity are eliminated on consolidation. Transactions with associated entities accounted for under the equity method are not eliminated, and therefore require separate disclosure as RPTs.
6. Key Management Personnel
In the context of this Policy, KMP are considered as:
All Directors and/or Board Members of the Company; and
Other persons with the authority and responsibility for planning, directing, and controlling Company activities. This includes Board Members, key advisors to the Board (and Board subcommittees), the Chief Executive Officer (“CEO”) and members of the Management Team (“MT”).
The Board, together with the CEO and MT, have the authority and responsibility to plan and control Company activities, to manage Company resources and for the overall achievement of Company objectives. Therefore, the CEO and MT members are considered KMP.
6.1.Close Family Members
Close family members of an individual are close relatives of the individual or members of the individual’s immediate family who can be expected to influence, or be influenced by, that individual in their dealings with the entity.
Judgment is necessary in determining whether an individual should be identified as a close member of the family of an individual. In the absence of information to the contrary (such as estrangement), the following immediate family members and close relatives are presumed to satisfy the definition of close members of the family of an individual:
1) A spouse, domestic partner, dependent child, or relative living in a common household;
2) A grandparent, parent, nondependent child, grandchild, brother, or sister; and
3) The spouse or domestic partner of a child, a parent-in-law, a brother-in-law, or a sister-in-law.
6.2.Disclosures
The Company shall disclose:
1) The short-term and long-term employee benefits for KMP;
2) The total amount of all other remuneration and compensation provided close family members of KMP, by the Company during the reporting period, showing separately the aggregate amounts provided to KMP and their close family members:
3) For loans not widely available to persons who are not KMP, for each individual KMP member and each of their close family member:
- The amount of loans advanced during the period and terms and conditions thereof;
- The amount of loans repaid during the period;
- The amount of the closing balance of all loans and receivables; and
- Where the individual is not a Director, Board Member, or MT member the relationship of the individual to such body or group.
RPT disclosures for KMP will:
1) the disclose all information about relevant RPTs, whether or not they occurred at arm’s length basis.
2) KMP may be employed on a full- or part-time basis; the number of individuals disclosed as receiving remuneration needs to be estimated on a full-time equivalent basis.
3) The Company will make separate disclosures about the major categories of KMP that they have.
4) Where an individual is a member of both a Board Member and a MT member, that individual will be included in only one of those groups for the purposes of this Standard.
KMP Remuneration can include a variety of direct and indirect benefits.
- Where the cost of these benefits is determinable, that cost will be included in the aggregate remuneration disclosed. Where the cost of these benefits is not determinable, a best estimate of the cost to the reporting entity or entities will be made and included in the aggregate remuneration disclosed.
- When non-monetary remuneration that is able to be reliably measured has been included in the aggregate amount of KMP remuneration disclosed for the period, disclosure would also be made in the notes to the financial statements of the basis of measurement of the non-monetary remuneration.
This Policy requires the disclosure of certain information about the terms and conditions of loans made to KMP and their close family members, where these loans:
1) Are not widely available to persons outside the KMP group; and
2) May be widely available outside the KMP group, but whose availability is not widely known to members of the public.
The disclosure of this information is required for accountability purposes. The exercise of judgment may be necessary in determining which loans should be disclosed to satisfy the requirements of this Policy. That judgment should be exercised after consideration of the relevant facts, and in a manner consistent with the achievement of the objectives of financial reporting.
7. Related Party Identification
The Finance Department will maintain a full list of all related parties on a continual basis to ensure that they can identify all related party in all relevant reports, review and external audits. The Finance Department will liaise with the Legal, Compliance and Human Resources departments on a continual basis to ensure that the full list of related parties utilized by the Finance Department is, at all times, current and accurate. When a request for a new vendor is received by the Finance Department, the finance department assess if this vendor shall be categorized as a Related Party. If the vendor meets the RP criteria, the transactions with the vendor as monitored and reported separately.
The Legal and Compliance departments will provide the Finance Department with full list of:
1) all subsidiaries within the Group and advise of any changes to the same throughout the year;
2) the shareholders of the Group with significant interests and of any changes in the shareholding of the Group during the year; and
3) the latest Board membership and advise the Finance Department of any changes to the makeup thereof during the year.
The Human Resources department will provide a full list of the KMP to the Finance Department. Based on the judgement of the Finance department and the Human Resources department, a judgement will need to be taken to determine whether there have been any transactions with a KMP close family member and a decision taken to determine whether the disclosure of close family members will be required as well. If such a disclosure is required, the Human Resources department will liaise with the relevant KMP to provide the responsible Finance employee with all necessary details for the disclosure.
7.1.Related Parties Memo
The Finance Department with draft a memo based on all the sourced information on the RPTs for the year. This memo will amongst other items disclose all RPs identified as well as provide detailed financial information about the transactions themselves. This will include:
1) Revenue generated from and owing to RPs
2) Expenses recharged, paid on behalf or to be paid on behalf of RPs
3) Finance Costs related to loans and bank guarantees from or to RPs
4) Employee Benefits (both long- and short-term)
5) Dividends paid to or to be paid to RPs
Based on the judgement of the Finance Department, the memo may also disclose the particulars of significant RPTs, but this will be determined on a case-by-case basis.
A copy of the memo will be forwarded to the Group’s auditors for their consideration and action during the annual audit.