Employee Share Schemes Where (INTER VIVOS) Trusts are Shareholders

nicolene septemberIn recent years (inter vivos) trusts have become a popular vehicle to use for purposes of employee share schemes to facilitate empowerment transactions within the private sector.

Also, in many instances trusts are still valuable business continuity planning tools.
In many instances companies endeavour to comply with the requirements of Broad Based Black Economic Empowerment or “BBBEE”, but the benefactors are not in the financial position to “buy in” in lumpsum. Interestingly, the Companies Act (71 of 2008) (the Act) has introduced section 40(5), which permits a company to issue shares to a subscribing party before the company has received the subscription consideration. This would have been void under section 92 of the Companies Act of 1973.

Using the trust structure together with appropriate financial arrangements makes it possible for these persons to now buy in. This may also facilitate a long term strategy of grooming young and dynamic employees into tomorrow’s directors in the boardroom.

Accordingly, this is a positive improvement in terms of empowerment transactions, particularly in facilitating many opportunities for businesses to comply and grow their businesses in a strategic manner.

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