This is the typical scenario presented:
- A QSE company (under R50m turnover) is non-compliant.
- They are advised to set up a separate company that would have 100% black shareholders (either black employees or an NGO) and this company would have a 51% share option in the main company, which would mean that they receive an automatic B-BBEE level 2 (via the affidavit route).
- The 51% share option lacks real ownership and control, economic interest and the authority to appoint the majority of the Directors in the main company.
- At the end of the 5 year share option period, the owner would still be able to retain control of the company and the share option would fall away.
The B-BBEE Commission has advised that where a “measured entity in an effort to comply with the B-BBEE ownership requirements, will establish share option structure not aligned to the requirements of the B-BBEE Act, such must be reported to the B-BBEE Commission” and this could lead to a serious fronting fine and/or criminal charges.
Click on the link below for the CLARIFICATION ON THE LEGITIMACY OF SHARE OPTIONS:
Clarification-Response-on-the-Legitimacy-of-Certain-Share-Options
