Transactions with related parties

The Board of Directors reserves the right to approve any transaction between the Company and a director or a significant shareholder. However, it is incumbent on the Nomination and Remuneration Committee to report on the transactions which entail or might entail any conflict of interests, related-party transactions or which entail the use of corporate assets..

In no event will the Board of Directors approve the transaction if previously a report has not been issued by the Nomination and Remuneration Committee evaluating the transaction from the standpoint of market conditions.

In the event of transactions with significant shareholders, the Nomination and Remuneration Committee shall examine it also from the standpoint of an equal treatment for all shareholders.

In the case of transactions within the ordinary course of Company business and being of a habitual or recurrent nature, a general authorization of the line of transactions and their conditions of execution will be sufficient.

The Company shall inform of the transactions conducted with directors, significant shareholders and Related Persons in the half-yearly public periodic information and in the Annual Corporate Governance Report, within the scope of the Law. Likewise, the Company shall include on the notes to the annual accounts information on the transactions carried out by the Company or any companies within the Inditex Group with directors and with those acting on their behalf, whenever they are alien to the ordinary course of trade of the Company or are not carried out in normal market conditions.

No Board authorization is required for those related-party transactions that meet at the same time the following terms:

1. que se realicen en virtud de contratos cuyas i) they are conducted under contracts with standard terms and conditions which apply en masse to many clients;
2. they are conducted at prices or rates generally established by the suppliers of the good or service in question;
3. their amount is not in excess of 1% of the Company’s annual revenues.

The detail of the transactions carried out by the Inditex Group with related individuals or entities, and of significant transactions carried out by Inditex with other entities belonging to the same Group, provided that these are not eliminated in the process of preparing the consolidated financial statements and do not form part of the ordinary business of the company as regards its object and conditions, is included in the relevant section of the Annual Corporate Governance Report.

Mechanisms to prevent conflicts of interest

The definition of “conflicts of interest” is provided in section 32 of the Board of Directors’ Regulations, set of rules which also lay down the rules governing such situations. Sections 31, 34 and 35 of the Board of Directors’ Regulations address the rendering of professional services in competing companies, the use of corporate assets, the use of non-public company information for private ends, and the taking advantage of business opportunities of the Company. On the other hand, section 37 headed: “Duties of information of the director”, provides the specific questions regarding which Directors must provide information to the Company.

Additionally, section 1 of the Board of Directors’ Regulations provides that the rules of conduct established thereon for the Directors shall apply, to the extent that they are compatible with their specific nature, to the senior management of the company who are not directors. More particularly and with the due nuances, the following sections shall apply to senior managers: section 30 (duty of confidentiality), 32 (conflicts of interest), in connection with the duty of informing the Company, 33 (use of corporate assets), 34 (non-public information), 35 (business opportunities), and 36 (prohibition to make undue influence of the office).

Likewise, with regard to significant shareholders, section 38 of the Board of Directors’ Regulations provides the rules regarding “Transactions with directors and significant shareholders”.

Among the duties it is entrusted with, it is incumbent on the Nomination and Remuneration Committee to report on the transactions which entail or might entail any conflict of interests, related-party transactions or which entail the use of corporate assets, and generally, on those topics covered under Chapter IX of the Board of Directors’ Regulations. In light of such report, approval of the transaction, where appropriate, falls on the Board of Directors.

Meanwhile, section 5 of the Internal Regulations of Conduct regarding Transactions in Securities sets forth the principles that affected persons must abide by with regard to conflicts of interest (Independence, abstention and confidentiality) and provides that they shall undertake in writing to act independently in their activities and to make known to the Code Compliance Office those conflicts of interest to which they are subject due to their activities outside the Inditex group, their family relationships, their personal property, or for any other cause with suppliers, agents and franchisees, external advisers and the like.

Additionally, section 4.8 of the Code of Conduct and Responsible Practices provides the way Inditex’s employees must act in case of conflicts of interest between their personal interests and those of the Company, and addresses the situations that must be disclosed to the Committee of Ethics.