The BEE Regulations (no 40053) gazetted on 6 June 2016 included instructions for “Registration of a Transaction” under code 100 (Ownership), and indicated that the threshold for reportable transactions was yet to be determined. (The regulations can be seen here. [ 2610 kb ])
When the draft proposal for this threshold was published for commentary, it proposed the threshold as follows: “All major B-BBEE ownership transactions, as per code 100 of the Codes of Good Practice as amended, which equals or exceeds R100 million, calculated by either combining the annual turnover of both entities or their assets value, must be registered with the B-BBEE Commission.”
A new notice [ 459 kb ] gazetted on 9th June 2017, now confirms the new threshold of R25 million and requires that all ownership transactions which equal or exceed this value must be registered with the B-BBEE Commission.
At first glance, it’s clear that the threshold has dropped considerably, from R100m to R25m. There has, however, been some confusion over how to define the “transaction value” and already, there has been some debate in the market place as to how to define this.
The clause contained in the draft referring to “equals or exceeds R100 million, calculated by either combining the annual turnover of both entities or their assets value” does not appear in the new notice.
In our recent correspondence with the B-BBEE Commission, they have confirmed that transaction value, excludes the administration, professional and legal fees.
They clarify further, “Therefore, transaction value would be the price paid or payable for the shares, assets or business being transferred, as agreed between the parties. It is our view that the agreed price would be based on what the value of what is being transferred is, taking into account negotiated factors like discounts. If the price is nominal or discounted, and agreed by the parties, that will be accepted.”
The Commission also stated that, “where there are indications that the nominal price or discount is not necessarily for the benefit of the B-BBEE parties to the transaction but merely to manipulate the transaction value to be below the threshold, the B-BBEE Commission may seek further details, and perhaps investigate the transaction.” This would not apply to transactions that took place prior to the gazetting of the threshold on 9 June 2017, as the threshold was not known before then.
The B-BBEE Commissioner went on to say, “We are of the view that the parties would arrive at the transaction value in good faith, taking into account the valuation reports and due diligence performed on the shares, assets or business concerned.”
The regulations require that a party that enters into a major broad-based black economic empowerment transaction that is above the R25 million threshold must submit the transaction to the Commission for registration within 15 days of concluding the transaction.
The requirement is however, also retrospective. “All major B-BBEE ownership transactions concluded on or after the proclamation date of the B-BBEE Act, 2003 as amended, namely 24 October 2014, but before the final publication date of this Notice (9 June 2017) which equals or exceeds the above threshold must be registered with the B-BBEE Commission within 60 days of the final publication of this Notice.”
What do you need to do?
You are required to report to the BEE Commission per Part 5 of the BEE regulations, using form B-BBEE 18, contained in the Regulations. The form is basic and requires no supporting information. It can be submitted to email@example.com
The Commission has undertaken to respond immediately confirming receipt and within 10 days, provide a certificate of registration.
The Commission may also, within 90 days, decide to assess the transaction. The reporting party will be advised in writing of any concerns. They may be issued with written advice to take steps to remedy the transaction within a reasonable period after receiving the advice from the Commission, failing which the Commission may proceed to initiate an investigation.
If the ownership transaction falls under equity equivalents for multinationals (statement 103), you are NOT required to report.
For more information about B-BBEE ownership transactions please contact us.