R25Mill Broad-Based BEE transactions to be registered & reported

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Published Jun 27, 2017

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Johannesburg - Grant

Thornton Verification Services on Tuesday indicated that there should soon be

more clarity on the extent of transformation brought about by Broad-based black

empowerment (B-BBEE) transactions with an ownership element.

According to Jenni Lawrence,

Managing Director of Grant Thornton Verification Services, this follows the

B-BBEE Commission’s decision that all such B-BBEE transactions with a value of

R25 million and upwards must be reported and registered.

The BEE Regulations were originally

gazetted a year ago, with instructions that major transactions with an

ownership element exceeding a certain threshold, would be required to be

reported to the Commission. A draft notice a few months later suggested the

threshold should be R100 million, followed by a final notice gazetted earlier

this month, lowering the threshold to R25 million.

“The lower threshold means

that more empowerment deals will come under scrutiny of the B-BBEE Commission,

and this should give the public a better idea of the extent of empowerment in

the economy” said Lawrence.

Lawrence said verification

Services at Grant Thornton believes this decision will enable the Commission to

have a significantly better understanding as to the level of broad-based

empowerment that has been reached.

According to the B-BBEE

Commission, the rationale behind registering certain empowerment transactions

is to allow for monitoring of compliance, the levels of transformation and the

extent to which benefits of major B-BBEE transactions flow to the black people

that are part of these deals.

“While there was initially

some confusion as to how the value of deals will be determined, the Commission

has since clarified that the transaction value excludes administration,

professional and legal fees. The value therefore refers to ‘the value of the

sale of asset, business or equity instrument,” said Lawrence.

Any party that enters into

such a transaction has to notify the B-BBEE Commission within 15 days of

concluding the transaction.

“A very interesting element

of this regulation is that it will be applied retrospectively to all major

broad-based empowerment transactions that have been concluded on or after the

B-BBEE Act was proclaimed (24 October 2014) and before the publication of the

latest notice (9 June 2017).”

The parties to these past

transactions will have 60 days to register the deal's’ details with the

Commission. She emphasises that this registration is not tantamount to seeking

approval for a deal, but rather a notification of transactions.

“We do not foresee this

decision resulting in more bureaucracy for those parties that have concluded

empowerment transactions since 2014, as the Commission requires a basic form –

that is contained in the Regulations – along with the documents the parties

would have drawn up to conclude the transaction, to be submitted for

registration purposes.

Read also:  DTI gets serious about B-BBEE

This includes a brief

description of the deal, legal agreements, such as copies of the signed

shareholders’ agreements, as well as a schematic diagram of ownership before

and after the transaction,” said Lawrence. She believes that this

should give the Commission and the public more insight into an area often

criticised for being opaque.

“Over the past few years

especially there has been a perception that broad-based empowerment

transactions do not always comply with the goal of the legislation, and that

there is still only a handful of real beneficiaries. The registration of more

transactions should help to clarify this field and give policymakers an

indication of the efficacy of the regulations,” said Lawrence.

BUSINESS REPORT ONLINE

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