Are you being sold a dubious B-BBEE share option scheme? Hear what the B-BBEE Commission has to say……..

Firstly, compliments of the season to you all and here’s to wishing everyone a good 2021!

I hope you have all managed to remain safe and hopefully had a decent break!

Onto interesting business matters now…….

Towards the latter part of 2020 we had a non-compliant QSE client come to EconoBEE and explain that they had a consultancy offer them an ownership option, which would make them an automatic B-BBEE level 2 (via the 51% affidavit route), and they wanted our view on it.

We vehemently disagreed with the structure that was being “sold” to this client, and explained why, but we committed to get clarification from the B-BBEE Commission.

Background:

  • The client is a QSE company (under R50m t/o) and they are non-compliant.
  • They were advised to set up a separate company that would have 100% black shareholders (either black employees or an NGO) and this company would have a 51% share option in the main company, which would mean that they receive an automatic B-BBEE level 2 (via the affidavit route) and would therefore also not be audited by a verification firm!
  • The devil’s in the detail and the detail here is the clarification of the “share option”!
  • The 51% share option showed a lack of real ownership and control, a lack of economic interest and lacked the authority to appoint the majority of the Directors in the main company.
  • At the end of the 5 year share option period, the owner would still be able to retain control of the company and the share option would fall away.
  • The B-BBEE Commission advised that where a “measured entity in an effort to comply with the B-BBEE ownership requirements, will establish share option structure not aligned to the requirements of the B-BBEE Act, such must be reported to the B-BBEE Commission” and this could lead to a serious fronting fine and/or criminal charges.

To read the full view of the B-BBEE Commission, please click here

To listen to one of our Legal Directors discussing B-BBEE fronting issues on eNCA tv, please click here

To peruse our 2021 Online Workshop List, please click here

EconoBEE has been at the forefront of guiding some of South Africa’s largest generic firms to obtain their B-BBEE goals, and we are extremely adept at putting together the best, most cost-effective, B-BBEE solutions for your business.

Why not give us, at EconoBEE, a call on 011 483 1190 or email us and let us help simplify and expedite your transformation journey!

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