Black Ownership Advisory – New Transactions
When South African corporates or Multinationals operating in South Africa resolve to investigate the possibility of introducing Black Ownership into the entity, this triggers a complex process, which has to be undertaken before the implementation of an actual transaction. The process culminates in approval by an EXCO, Board/s and shareholders to proceed with a certain type of BEE transaction.
This process is often necessary and prudent, as many entities operating in South Africa have an idea of the type of BEE shareholder they require. However, Advance Corporate Advisors often finds that internal decision makers can base their preference on information that is not always sound, and built thorough a thorough understanding. In addition, the percentage Black Ownership that is required by the business tends to differ between entities, depending on commercial requirements and expectations of stakeholders, including customers, and Sector Codes.
Therefore, Advance Corporate Advisors has built a product offering which, in consultation with the client, will consider the different Black Ownership approaches available for the business, and which takes into account the following:
- The business imperative for BEE Ownership for the measured entity or the group of companies, and the differing requirements for different group entities, which may result in different transactions, or simply the first transaction;
- The challenges inherent in mobilizing large organizations with multinational shareholding structures;
- The financial and tax implications of B-BBEE;
- The lack of certainty in respect of matters in the Amended Codes of Good Practice, and the ability of the DTI and/or the BEE Commission to effect substantive and/or interpretive amendments through explanatory notes and a Technical Assistance Guide;
- The different mechanisms for the introduction of Black Ownership into the client, as most appropriate for that entity, and the environment in which it operates – where clients may have specific requirements which need to be met;
- A serious and abiding commitment to transformation and the need for all corporates operating in South Africa to ensure that they understand and participate in the current political narrative pertaining to Radical Economic Transformation (RET);
- The absolute requirement that clients avoid fronting in any way, shape or form, and are confidently able to demonstrate to any stakeholder, including the BEE Commission in a notifiable transaction, that then transaction embodies both the spirit and letter of BEE legislation and policies;
The result will be a detailed information memorandum, which will assist the organisation in making a board decision about the way forward, with a full understanding of the strategic imperative and the various ownership options available.