Major B-BBEE transactions – definition and documentary requirements

A major B-BBEE transaction refers to any transaction between entities/parties that result in ownership recognition, the value of which equals or exceeds R25 million.

The Broad-Based Black Economic Empowerment Commission (“B-BBEE Commission”) is mandated amongst others to receive and analyse major B-BBEE transactions, to promote good governance and accountability by creating an effective and efficient environment for the promotion and implementation of the objectives of broad-based black economic empowerment (“B-BBEE”).

This would help to realise whether the deal entered into by parties meet B-BBEE requirements and that there are no fronting aspects; and to assist the B-BBEE Commission to deliver on its functions and achieve its mandate. The Minister of Trade and Industry announced, in the Government Gazette of 9 June 2017, that all major B-BBEE transactions must be registered with the B-BBEE Commission. B-BBEE Regulations require that major B-BBEE transactions that relate to ownership exceeding a threshold of R25 million transaction value, be registered with the B-BBEE Commission, as guided by Statement 100 of the Codes of Good Practice (“the Codes”).

In terms of Regulation 18 of the B-BBEE Regulations, a party who enters into a major B-BBEE transaction that is above the threshold set out above must, within 15 days of concluding the major B-BBEE transaction, submit the major B-BBEE transaction to the B-BBEE Commission in the prescribed form. This means major B-BBEE transactions concluded from 09 June 2017 must be registered within 15 days.

Upon receipt of the registration of a major B-BBEE transaction, the Commission must:

  1. Immediately acknowledge receipt of the registration in writing to the party who submitted the transaction for registration; and
  2. Within 10 days issue the certificate of registration to the party that submitted the transaction for registration if the requirements for registration set out in FORM B-BBEE 19 have been met.

The Commission may within 90 days after the major B-BBEE transaction has been registered with it, assess the transaction to determine adherence to the Act, and advise the party that submitted the transaction for registration in writing of any concerns about the transaction.

The party issued with the written advice contemplated in sub-regulation (3) above must 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 in terms of section 13F(1)(d) of the Act.

The parties to a major B-BBEE transaction must take steps to seek appropriate advice prior to concluding the transaction, including through advisory opinion services of the Commission provided for in the Act, as advice that may be provided by the Commission after registration does not substitute such prior advice before the transaction is concluded.

The Commission may, subject to valid confidentiality claim, use the information submitted for the registration of the major B-BBEE transaction in producing a report or trends that the Commission may publish as it deems appropriate, including on its website.

The Commission must be notified of any material change to the B-BBEE elements of the entity occurring after the transaction has been registered, if such material change does meet the threshold for the registration of a major B-BBEE transaction.”

Although the B-BBEE Act simply provides for “registration” of Major B-BBEE Transactions with the Commission, the Regulations empower the Commission to require the parties to “take steps to remedy the transaction” if the Commission has concerns with it.

The threshold that has been set by the Minister is any transaction that is concluded by parties whose combined annual turnovers or asset values equals or exceeds R100 million.

The requirement to submit the transaction for registration in terms of these Regulations does not constitute the requirement to obtain approval from the Commission before the transaction can be implemented.

What is required when reporting a major B-BBEE transaction to the B-BBEE Commission?

Documents to be submitted with Form B-BBEE 18 when registering a major B-BBEE transaction include the list below; without this information a certificate of registration may not be issued.

  1. Brief description of the major B-BBEE transaction.
  2. Copy of a signed Sale Agreement, or similar agreement transferring shares/interest/assets/business, as the case may be, from one party/entity to another.
  3. Copy of signed Shareholders’ Agreements, or similar agreement governing the relationship between holders of interest, in respect the major B-BBEE transaction.
  4. Copy of signed trust deeds, if the ownership structure of the major B-BBEE transaction includes a trust.
  5. Copy of a signed financing agreement relating to the transaction, irrespective of whether or not it was vendor financed.
  6. Copy of a schematic diagram of the ownership structure before and after the conclusion of the major B-BBEE transaction.
  7. Copy of a valid B-BBEE Certificate or a B-BBEE Sworn Affidavit, as the case may be, of the measured entity involved in the major B-BBEE transaction.
  8. Any document that the parties/entities deem relevant to the transaction.

Author Craig Tonkin

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