Major B-BBEE transactions and the impact of the new threshold

What is the impact of the new threshold for major B-BBEE transactions?

Designed by Freepik
Designed by Freepik

Under the Revised Code of Good Practice 2013, which became effective on 1 May 2015, businesses can either achieve an Automatic Recognition Level (ARL) if their turnover is below R50 million and they have at least 51% black ownership (except for Exempted Micro Enterprises which are an automatic Level 4 regardless of ownership), or they need to make use of the B-BBEE scorecard to achieve a BEE compliance level. One of the elements on the B-BBEE scorecard is Ownership. For businesses with black ownership (measured under the Ownership scorecard), a new registration requirement was recently added.

On 9 June 2017 the Minister of Trade and Industry published in the Government Gazette a new threshold for registering major B-BBEE transactions with the B-BBEE Commission, including a definition of what can be regarded as a major B-BBEE transaction.

What is a major B-BBEE transaction?

A major B-BBEE transaction is defined as any transaction between entities/parties that results in Ownership Recognition in terms of Statements 100 and 102. Statements 100 and 102 refer to the Ownership scorecard. Multinational companies and businesses which are not required to complete a scorecard will be excluded from this.

The threshold will be based on the transaction value (excluding administration, professional and legal costs), if R25 million or above, or a net asset value of R25 million in the event of a sale of the asset to earn ownership points (the so- called Qualifying Transactions Option).

What elements apply when registering a major B-BBEE transaction?

  • All parties involved in the transaction must register the transaction collectively;
  • All major B-BBEE transactions concluded on or after 24 October 2014, but before 9 June 2017, must register the transaction within 60 days;
  • Any person may voluntarily register any major B-BBEE transaction if concluded before 24 October 2014;
  • The documentation must be submitted for registration purposes in accordance with the requirements set by the Commission;
  • All B-BBEE ownership transactions concluded after 9 June 2017 must be registered within 15 business days;
  • The Minister will have the authority to amend the threshold from time to time.

Before the threshold was published, the Minister issued a notice for public comment in November 2016. In this notice the Minister proposed that the threshold be calculated based on the combined turnover of the parties involved or their asset value. If the combined value were to exceed R100 million, registration of the transaction would have been necessary and only 30 days were allowed for registration. The notice also prescribed the documentation that were needed for submission to the Commission, whereas the final Government Gazette dated 9 June 2017 does not prescribe such documentation, leaving it to the discretion of the Commission. The calculation method was amended and the threshold amount changed to R25 million.

Although it is currently unclear what the actual extent of the Commission’s role would be in this regard, registrations would most probably be used for statistical reporting purposes as the B-BBEE Act does not afford the Commission the authority to approve any transactions.

SERR Synergy specialises in unique B-BBEE ownership structures and our services include tailor-made solutions that meet existing BEE challenges by implementing effective and value adding strategies.

About our author: Audrey Cloete obtained her LLB degree from the North-West University Potchefstroom in 2003. She completed her articles with the main focus on Criminal Law and is also an admitted Conveyancer. Audrey joined SERR Synergy in 2015 where she currently works as a Legal Compliance Advisor.