BB-BEE - Ownership Options...
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 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;
- Rural women empowerment group,
- Humanitarian groups where the majority of members are previously disadvantaged black people,
- Black owned cooperatives and
- 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.