Objects of the Broad-Based Black Economic Empowerment (“BBBEE”) Act, 53 of 2003, as amended by Act 46 of 2013(hereafter the “Act”), include promoting economic transformation and achieving a substantial change in the racial composition of ownership. It is with that in mind that under the Act, “equity ownership” does not simply mean a transfer of shares. In order to enter into a legally enforceable transaction, that would allow the company to claim the points, the following elements must be present, there must be:

  1. exercisable voting rights;
  2. economic interest; and
  3. net value.

 

Structures, provisions and transactions that the BBBEE Commission has expressed concerns with:

  • Call options
  • Pledges
  • Some restraint of trade provisions
  • Preference Shares
  • BBBEE warranties and breach provisions
  • Broad-based ownership structures
  • Employee ownership structures
  • Trusts
  • Private Equity Funds

The principle of true empowerment should be at the heart of any transaction. Contact us for assistance.

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