By Erika Petersen-Holmes, Head of B-BBEE and Partner in the Corporate & Commercial Law department
The Minister of Trade & Industry has published a proposed threshold for the definition of "Major B-BBEE Transaction" which appears in section 13F of the Broad-Based Black Economic Empowerment ("BBBEE") Act, 53 of 2003, as amended by Act 46 of 2013.
Section 13F of the BBBEE Act states that the functions of the newly established BBBEE Commission include "to maintain a registry of major BBBEE transactions" and to "exercise such other powers … as may be conferred on the Commission in writing by the Minister".
However, the regulations to the BBBEE Act which were published on 6 June 2016 go further than the Act and stipulate the following process in relation to Major BBBEE Transactions:
"A party that enters into a major BBBEE transaction that is above the threshold determined by the Minister by notice in the Gazette shall, within 15 days of concluding the transaction, submit the transaction to the Commission for registration in the prescribed FORM B-BBEE 18 to comply with section 13F(1)(f) of the Act.
Upon receipt of the registration of a major BBBEE transaction, the Commission must—
immediately acknowledge receipt of the registration in writing to the party who submitted the transaction for registration; and
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 BBBEE 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 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.
The parties to a major BBBEE 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 BBBEE 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 BBBEE 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 BBBEE transaction."
In other words, although the BBBEE Act simply provides for "registration" of Major BBBEE 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. Although no further detail has been provided, presumably further regulations will be issued mirroring the Competition Commission regulations regarding the calculation of asset values and turnovers.
No further definition of "BBBEE transaction" has been given and it is not clear whether this definition refers only to ownership transactions or to any type of transaction and it is not clear whether it refers only to transactions concluded with entities that are majority black owned or with any entity that has a BBBEE status level.
The notice requires parties who have concluded one of these mysterious Major BBBEE Transactions at any time since 24 October 2014 to report same to the Commission.
Interested persons have 30 days to comment on this notice by emailing firstname.lastname@example.org.
For more information on the above contact:
Erika Petersen-Holmes, Head of B-BBEE and Partner in the Corporate & Commercial Law department
+2782 453 8818