Historically, the Leniency Programme was a compliance mechanism that encouraged reporting of all major B-BBEE transactions prior to the promulgation of the amended B-BBEE Act, as well as promote adherence to the B-BEEE Act.
The B-BBEE Act in section 13F(3)(b)(ii) permits the B-BBEE Commission to issue non-binding advisory opinion on any provision of the B-BBEE Act to any person who seeks advice on the nature of the identified B-BBEE initiative or structure.
Section 13F(1)(f) of the B-BBEE Act requires the B-BBEE Commission to maintain a registry of major broad based black economic empowerment (“B-BBEE”) transactions, above a threshold determined by the Minister of Trade and
Industry (the Minister) by notice in the Gazette. Regulation 18 in Part 5 of the B-BBEE Regulations of 2016 outlines the process for registration of a major B-BBEE transaction.
On 9 June 2017, the Minister issued Notice No. 551 in Government Gazette No. 40898 (“Notice”) which determines the threshold for registering a B-BBEE transaction. In the Notice a major B-BBEE transaction refers to any transaction between entities/parties that results in ownership recognition in terms of Statement 100, the value of which equals or exceeds twenty-five million rands (R25 million).
The threshold is based on the value of the transaction excluding administration, professional and legal fees. For Statement 102, the value of the transaction means the value of the sale of asset/business/equity instrument.
The main benefit of the registry for major B-BBEE transactions for the B-BBEE Commission is that it will allow for monitoring regarding compliance, levels of transformation and extent to which benefits of the major B-BBEE transactions flow to the black persons that are part of these deals in compliance to the objectives of the B-BBEE Act.
The Notice states that major B-BBEE transactions concluded on or after the proclamation date of the B-BBEE Act, 2003 as amended, namely 24 October 2014 must be registered. The B-BBEE Commission has since issued an Explanatory Notice on how to register such transactions. This then means that all major B-BBEE transactions concluded PRIOR to the promulgation of the amended B-BBEE Act were excluded from being registered as they predate the promulgation of the B-BBEE Act. The Notice only encourages voluntary registration of such transactions. Some of these transactions are not consistent with the B-BBEE Act and are currently being recognised for B-BBEE points under the ownership scorecard of the relevant Codes of Good Practice.
In its efforts to oversee, supervise and promote adherence to the B-BBEE Act, the B-BBEE Commission developed a Leniency Programme (the Programme) to facilitate a process through which major B-BBEE transactions that
are not consistent with the B-BBEE Act could be reported to the B-BBEE Commission in return from immunity from investigation and enforcement. The Programme outlined the requirements, procedures and implications for cooperation relating to reporting of major B-BBEE transactions concluded BEFORE 24 October 2014. The Programme is also necessitated by unwarranted ownership recognition points reflected on some of the B-BBEE certificates as a result of the lack of integrity in the verification industry, where certain verification professionals issue or recognise points for ownership even when the black ownership in question falls short of meeting the requirements of the B-BBEE Act or the verification professional had failed to apply the prescribed verification methodologies to verify black ownership.
The granting of immunity must not be interpreted to mean that the B-BBEE Commission will not initiate an investigation against misaligned transactions or that the victims of such transactions are prevented from lodging a complaint with the B-BBEE Commission in line with section 13F(1)(c) and (d) of the B-BBEE Act read with regulations 15 of the B-BBEE Regulations, or that the B-BBEE Commission condones any state procurement or economic activity which was awarded as a result of any misaligned ownership transaction. Immunity from investigation is granted simply for reasons that the transaction by law is not required to be registered and that the party or parties to that transaction have voluntarily decided to report the transaction to the B-BBEE Commission, prior to the B-BBEE Commission calling for such transaction in terms of section 13F(1)(a) of the B-BBEE Act or having initiated an investigation.
Interpretation of the Leniency Programme
Section 1 of the B-BBEE Act applies to interpretation of this Leniency Programme.
Section 2 of the B-BBEE Regulations also applies to this Leniency Programme.
Reportable B-BBEE ownership transactions
The Leniency Programme apply to all ownership transactions (excluding Statement 103 which deals with recognition of equity equivalents for multinational) concluded prior to 24 October 2014 from R25 million and above at the time of being concluded. The threshold is aligned to the threshold determined by the Minister through Notice No. 551 in Government Gazette No. 40898. The threshold is based on the value of the transaction excluding administration, professional and legal fees. For Statement 102, the value of the transaction means the value of the sale of asset/business/equity instrument.
Any party to the B-BBEE ownership transaction can report the transaction to the B-BBEE Commission in the prescribed FORM B-BBEE 22 issued in accordance with 13F(1)(a) of the B-BBEE Act.
Immunity from investigation will be removed should the party fail to report the B-BBEE ownership transaction to the B-BBEE Commission within the stipulated time frame (90 days from date of publication of the Leniency Programme) or that the B-BEE Commission has already initiated an investigation in relation to the transaction or any related transaction wherein the black ownership derived from the reported B-BBEE ownership transaction is recognised by the related transaction.
Upon receipt of the B-BBEE ownership transaction, a reportable transaction number will be allocated within five (5) days, and within ten (10) days issue the certificate of reporting a B-BBEE ownership transaction to the party that submitted the transaction using FORM B-BBEE 23, after the B-BBEE Commission has satisfied itself that the party in question meets the requirements of the Leniency Programme. Part of the evaluation may involve request for additional information or meeting with the party that reported the B-BBEE ownership transaction.
The B-BBEE Commission may within ninety (90) days after issuing the reporting certificate, assess the reported B-BBEE ownership transaction to determine adherence to the B-BBEE Act, and advise the party that submitted the transaction in writing of any concerns about the transaction. The party issued with the written advice must take steps to remedy the B-BBEE ownership transaction within 90 days after receiving the advice from the B-BBEE Commission. The B-BBEE Commission maintains a database of all reported B-BBEE ownership transactions and publishes it on its website or on any media platform.
Immunity from B-BBEE investigation
The B-BBEE Commission will provide the party reporting the B-BBEE ownership transaction with written immunity from B-BBEE investigation. Immunity granted is only limited to the reported B-BBEE ownership transaction, and will not extend to other B-BBEE elements as per the applicable Codes or other ownership transactions such as party is part of, unless the transaction has been reported in terms of this Programme.
The B-BBEE Commission may either grant absolute or conditional immunity depending on the circumstances surrounding the reporting of the B-BBEE ownership transaction. Absolute immunity will be granted in instances where the B-BBEE Commission after assessing the reported B-BBEE ownership transaction is of the view that the is no need to refer certain aspects of the transaction to other regulatory institutions such as the Companies and Intellectual Property Commission.
Conditional immunity on the other hand will be granted where the B-BBEE Commission has determined contraventions of other pieces of legislation and thus obligated to refer such violations to the relevant regulatory or enforcementinstitutions such as South African Revenue Services, National Prosecuting Authority and the Competition Commission.
Irrespective of whether absolute or conditional immunity from B-BBEE investigation had been granted, any party who after receiving immunity from the B-BBEE Commission was found to have engaged in any fronting practice outside the reported B-BBEE ownership transaction, forfeited the immunity granted.
Failure to implement the directive of the B-BBEE Commission regarding remedying the B-BBEE ownership transaction also resulted in the cancellation of the immunity status.
If subsequent to granting immunity from B-BBEE investigation it was established by the B-BBEE Commission that the reporting party failed to disclose information that was material for purpose of benefiting from the Leniency Programme, the B-BBEE Commission withdrew the immunity and proceeded to investigate the B-BBEE ownership transaction in line with the requirements of the B-BBEE Act.
Requirements and rules for receiving immunity from B-BBEE investigation
A party reporting the B-BBEE ownership transaction only qualified for immunity from B-BBEE investigation provided such a party was:
a. The first person to voluntarily report the B-BBEE ownership transaction to the B-BBEE Commission;
b. Disclose full and complete information pertaining to the reported B-BBEE ownership transaction;
c. Acting in good faith and cooperative in the manner that it interacts with the B-BBEE Commission and has not concealed any material information relating to the B-BBEE ownership transaction;
d. Willing to act in accordance with the directives of the B-BBEE Commission post assessment of the reported B-BBEE ownership transaction; and
e. The rules of confidentiality of information as prescribed in the B-BBEE Act also apply in respect of any information that is submitted through the Leniency Programme process. However, confidentiality claims cannot be raised to restrict the B-BBEE Commission from accessing all relevant and material information relating to the B-BBEE ownership transaction.
Failure to report a B-BBEE Ownership transaction
Any party that failed to report a B-BBEE ownership transaction within the stipulated time frame forfeited any immunity made available by the B-BBEE Commission, and when the B-BBEE Commission solely became aware of such transactions, the B-BBEE Commission initiated an investigation and the findings of such an investigation were issued without remedial actions, and further referred the matter for prosecution to the National Prosecuting Authority.
B-BBEE ownership transactions that could not be reported
There are instances where the Leniency Programme was not applied, for example:
- Transactions that were already subject to investigation in terms of section 13J(1) of the B-BBEE Act read with regulation 15 of the B-BBEE Regulations;
- Transactions where the B-BBEE Commission issued an advisory opinion and such advice was disregarded by the parties;
- Matters referred to the B-BBEE Commission for investigation by other regulatory institutions such as, but not limited to, the South African Revenue Services, Competition Commission, Companies and Intellectual Property 4. Commission, and South African National Accreditation Systems; and
- Transactions involving persons who were under investigation in terms of section 13J(1) of the B-BBEE Act read with regulation 15 of the B-BBEE Regulations.
In summary, above all else, honesty should prevail.
