B-BBEE and the Draft Legal Sector Code – update – March to May 2021

Reference documents:
Legal Practice Act, 28 of 2014
Broad Based Black Economic Empowerment Act no 53 of 2003
B-BBEE Legal Sector Code – draft number 1 of November 2020 and draft number 2 dated 11 February 2021

This follow-up article discusses some detail of the second Draft Legal Sector Code. As the 15 March 2021 deadline has passed and no new information has been published as yet future articles will elaborate on any new developments made after March 2021.

On 08 November 2020 the Legal Practice Council (LPC), issued an invitation to legal practitioners to participate in consultations for the development and drafting of the Legal Sector Code, as a Broad-Based Black Economic Empowerment (B-BBEE) charter for the legal profession in terms of s9 of the Broad-Based Black Economic Empowerment Act 53 of 2003 (the Act). The December 2020 deadline passed and in February 2021 a second draft of the Legal Sector Code was circulated for comment by 15 March 2021.

The reader is advised to read articles one, two and three of the initial set explaining the detail of the first draft of November 2020 before reading this article.

The Legal Practice Council has established the Sector Code Development Steering Committee (SCDSC) to oversee the Sector Code development process.

The previous articles did not fully list the specialised areas of practice affected by this draft sector code.

Below is a detailed list (and may increase as determined by the Legal Practice Council).

  1. corporate and commercial law;
  2. intellectual property law and cyber law;
  3. maritime law;
  4. regulatory law;
  5. conveyancing and property law;
  6. pension law;
  7. aviation law;
  8. entertainment law;
  9. arbitration and mediation;
  10. insolvency and business rescue;
  11. banking law;
  12. initial public offerings and the securities exchange;
  13. business and corporate tax law;
  14. assets restructuring;
  15. mergers, acquisitions and take overs;
  16. competition law;
  17. mining, energy and natural resources;
  18. international trade;
  19. corporate governance;
  20. due diligences and compliance;
  21. forensic and fraud investigation;
  22. transaction advisory services;
  23. environmental law;
  24. project finance;
  25. corporate finance;
  26. structured finance;
  27. construction and engineering law;
  28. media law;
  29. telecommunication law; and
  30. sports law.

Additionally, the reader may wonder other than public consultation who is involved in drafting this sector code.

A committee has been established by the Legal Practice Council, in terms of the B-BBEE Act, to facilitate and co-ordinate the drafting and the gazetting of the Legal Sector Code and it is constituted by major commercial associations in the legal profession, including the following:

• Black Lawyers Association (BLA);
• Pan African Bar Association of South Africa (PABASA);
• National Association of Democratic Lawyers (NADEL);
• National Bar Council of South Africa (NBCSA);
• General Council Bar of South Africa (GBCSA);
• Law Society of South Africa (LSSA);
• Black Conveyancers Association (BCA;
• Department of Justice and Constitutional Affairs (DoJ);
• Department of Trade, Industry & Competition (DTI&C);
• The Corporate Counsel Association of South Africa (CCAS);
• Advocates for Transformation (ATF)
• Legal Aid South Africa (LABSA) ; and
• South African Woman Lawyers Association (SAWLA).

SCOPE OF APPLICATION

The Legal Sector Code is applicable and binding on the following:

  1. Attorneys
  2. Advocates
  3. others; all legal entities where the majority of their annual revenue is derived from the business of the legal practice. For the purposes of this comment , majority means more than 50% of the annual revenue of the entity;
  4. Organs of state and public entities;
    4.1 all state-owned entities whose primary focus is the procurement of legal services from legal practitioners;
    4.2 government departments and all levels of government, national, provincial and local, the state law offices, state owned entities and institutions established in terms of Chapter 9 of the Constitution, which procure and consume legal services;
    4.3 the user and procurer of the legal services, the public sector referred to above shall be expected to use the Legal Sector Code to ensure the equitable distribution of its legal instructions;
  5. Private sector; all private sector entities that provide legal services to the public or procure legal services who resolved and elected to submit their reports to the Charter Council For avoidance of doubt, such private sector entities may be measured in terms of a different sector code. However, in instances where such private sector entities are measured in terms of a different industry sector Code, they may, choose to submit reports to the Charter Council reflecting the extent to which their annual budgets for legal services have been implemented in terms of the Legal Sector Code; and
  6. Legal Aid South Africa; this refers to independent statutory body established in terms of the Legal Aid South Africa Act, 39 of 2014, as amended, which is mandated by the state to enhance access to justice by providing legal services to those who cannot afford such services.

In the second draft of the Sector Code there has been no change to the priorities.

PRIORITY ELEMENTS AND SUB-MINIMUM

The priority elements are as follows:

  1. ownership; the sub-minimum requirement for ownership is 40% of net value points;
  2. skills development ; the sub-minimum requirement for skills development is 40% of the total weighting points for skills development; and
  3. enterprise and supplier development; the sub-minimum requirement for enterprise and supplier development is 40% for each of the enterprise and supplier development elements.

INTERPRETATION OF B-BBEE INITIATIVES IN THE LEGAL SECTOR CODE

LSMEs (means the legal sector measured entity, in the form of a law firm in case of attorneys or an advocate) are only measurable in respect of their South African operations and not their global operations and partnerships. This applies to the measurement of all the elements and indicators of the scorecard. The Legal Sector Code is a relevant, binding and applicable sector code for all activities listed in section 10 of the B-BBEE Act. This means that all LSMEs are, unless exempted, obliged to be measured in terms of this Legal Sector Code.

The requirement to submit data to the Department of Labour under the Employment Equity Act 55 of 1998 is only applicable to ‘designated employers’ who employ 50 or more employees. However, for the purpose of measurement in terms of the Legal Sector Code both Large Enterprises and QSEs that employ less than 50 employees are required to submit sufficient evidence for verification purposes.

As and when updates to the draft code are made available to the public new articles will be written explaining any significant changes.

Author Craig Tonkin

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