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BB-BEE - Ownership Options...

Updated on February 10, 2016

Exploring the different BB-BEE ownership options

Broad Based Black Economic Empowerment "BB-BEE" comprises a number of elements that make up the entire BB-BEE scorecard. One element that is hugely considered structural and not easily to alter, is BB-BEE Ownership.

We will look to summarizing a number of structures that entities can choose from when structuring their BB-BEE equity options.

  • Individual Shareholding

A traditional form of equity structuring has always been to sell shares to qualifying non-juristic BB-BEE candidates. This allows for a direct participation of individual shareholders in the strategic decision making of the entity in which they purchased shares.

  • Trusts

Trusts are an indirect vehicle used to own shares in an entity. In this form of ownership, beneficiaries appoint trustees to represent them in advancing the objectives of the trust. Trusts may vary from discretionary trusts to family trusts owning shares in the entity.

  • Employee Share Ownership Schemes

In an effort to enhance employee moral and goal congruency, some entities opt to set up employee share ownership schemes, wherein the employees of the entity also become the shareholders of the company and can participate in the strategic direction of their entity.

  • Broad Based Black Ownership Schemes

The entity may decide to compose ownership beyond the employees of the company or individual shareholders, this may include extending ownership to the following;

  1. Rural women empowerment group,
  2. Humanitarian groups where the majority of members are previously disadvantaged black people,
  3. Black owned cooperatives and
  4. Similar structured entities.
  • Institutional or mandated investors

Institutional investors such as pension funds, medical aid funds are also allowed as part of ownership structures. This requires the entity to demonstrate the BB-BEE credentials of such institutions to enable itself to recognize BB-BEE ownership points.

  • Sale of assets

An entity my claim BB-BEE ownership points if it sells part if its business to a qualifying BB-BEE entity. There are however a number of pre-qualifying provisions for this option to be exercised by the company.


Different entities have varying emotional feelings about relinquishing portions of their equity and accordingly, they will often consider the options mentioned above before choosing their most appropriate option.


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    • profile image


      2 years ago

      Thanks Mr Zungu for such useful information

    • Mbuso Zungu profile imageAUTHOR

      Mbuso Zungu 

      2 years ago from Durban - KZN

      True indeed Puseletso, The process by which some businesses have come to "embrace" transformation can be likened to the five stages of grief.

      For those grieving, it is commonly said that they will experience denial, then anger, followed by bargaining, then depression and finally acceptance.

      When black economic empowerment (BEE) was first put on the agenda in the 1990s and then formalised when the broad-based BEE codes were gazetted in February 2007, some businesses, probably most, went into denial: "We don't need it and we don't have to do it."

      But when a lack of compliance starts to hurt the bottom line - when, for example, that all important tender is lost to a competitor with BEE credentials - then anger sets in.

      Once that has subsided a company will begin the bargaining phase. Looking for a black partner, that is. But this, is where a company can tread on dangerous ground. A rush to secure a black partner may result in a deal that does not deliver the expected points on the BEE scorecard.

      My point is that a BEE deal will not score points if it does not translate into voting rights for the black partner equal to the stake acquired.

      So if a deal is done and this is the outcome, that is, no score for the scorecard, then depression will set in.

      After that, maybe acceptance will come.

    • profile image


      2 years ago

      Interesting article that simplifies how ownership can be structured to suit different entities. Clear, precise and to the point. It is indeed a difficult decision to give away equity.


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