News Just in: Majority of ownership schemes are invalid!!

Ownership is an important priority element and, for years, we at EconoBEE have been saying that ownership needs to be done properly. Ownership deals must show valid economic interest and exercisable voting rights to black people in terms of the BEE Act. Voting rights and economic interest, and not just dividends, should be legitimized just like any other ownership deal. The founder of our company, Keith Levenstein, was even on the task team set up by the DTI to discuss the ownership element of BEE in 2015/2016. I have been interviewed on Business Day TV and famously quoted as saying “what some people call loopholes, we call fronting”, along with many newsletters on this topic

https://www.econoserv.co.za/broad-based-and-employee-ownership-schemes/

https://www.econoserv.co.za/years-ahead-pack/

https://www.econoserv.co.za/category/general/newsletter/

Based on these founding principles, EconoBEE will at no stage turn a blind eye or influence clients to participate in illegal and illegitimate ownership schemes. We take pride in giving consulting advice that makes BEE sense and business sense based on the codes of good practice and the BEE Act for all clients.

Is your ownership structure valid?

Ownership states that black participants may acquire ownership through the creation of the following: a company, close corporation, a co-operative, a trust, a broad-based ownership scheme, an employee share ownership programme or any form of juristic person. It is important in the choice of entity one chooses to use in an ownership agreement, that one complies with the provisions of the BEE Act and the codes of good practice. There MUST be voting rights, economic interest and net value to black people and all rules must be followed in order to actually get the recognition.

What is fronting?

It has recently been reported that the BEE Commission launched an investigation into the use of trusts in fronting and found that the majority of broad-based schemes do not qualify. (https://www.businesslive.co.za/bd/national/2019-04-23-majority-of-broad-based-trusts-declared-not-black-ownership/)

Fronting is a form of misrepresentation which results in the violation of the BEE ownership structure and is a form of non-compliance to the BEE Act. Fronting is an intentional form of misrepresentation which involves the falsification or fraudulent claims on the scorecard. For example, window dressing, which is when black individuals are appointed purely for face value as opposed to actual participation and share ownership in the business, or are discouraged from meaningful participation in their misrepresented level.

The amended BEE Act says that ignorance of the law is no excuse as the BEE Act is clear that if one has actual knowledge, or reasonably ought to have known actual knowledge, one should comply or face a fine which amounts to 10% of your turnover or up to ten years imprisonment. Ownership transactions above 25 million rand related to ownership must be reported to the BEE commission.

Being one of the oldest BEE consultancies in the country, and with the most experience, we are perfectly positioned to assist our clients evaluate and implement BEE in their company. We offer training courses on all the elements, country wide, as well as offer specialised BEE consulting to make sure our valuable clients are implementing BEE in the best possible way.

Join us for our upcoming BEE workshops:

Title: Full Day BEE Workshop including the Proposed Amendments to B-BBEE Codes

Date: 30 May (JHB), 27 August (DBN), 09 October (CT)

Duration: 09h00 to 17h00

Price: R3 913.04 Excl VAT (50% discount for BEE Managed Service Clients)

Venue: Johannesburg – 435 Rugby Avenue, Ferndale, Randburg, Durban – The Circle, Douglas Drive, Ballito, Cape Town – TBC

 

Title: Half Day BEE Workshop including the Proposed Amendments to B-BBEE Codes

Date: 11 June (JHB), 26 June (CT), 16 July (DBN), 13 Aug (CT), 27 Aug (JHB)

Duration: 09h00 to 13h00

Price: R1 700 Excl VAT (Free of charge for BEE Managed Service Clients)

Venue: Johannesburg – 435 Rugby Avenue, Ferndale, Randburg, Durban – The Circle, Douglas Drive, Ballito, Cape Town – TBC

 

To book please email us on pheliswa@econobee.co.za or call us on 011 483 1190

Can’t attend? Please contact us and we will tailor a solution for you.

Click here for more information

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