Registering Major B-BBEE Transactions

When negotiating a Broad-Based Black Economic Empowerment (“B-BBEE”) ownership transaction, the parties’ attention is usually directed towards the purchase price, funding arrangements and their respective rights as shareholders. However, the transaction may also need to be registered with the B-BBEE Commission. This requirement should be considered at the outset, particularly given the short period allowed for submission.

‍

Transactions requiring registration

On 9 June 2017, the Department of Trade and Industry published Government Notice 551, requiring major B-BBEE transactions valued at R25 million or more to be registered with the Commission. The notice operates alongside section 13F(1)(f) of the Broad-Based Black Economic Empowerment Act 53 of 2003 and regulation 18 of the B-BBEE Regulations, 2016, which governs the registration process.

A major B-BBEE transaction is one that results in ownership recognition under Statement 100 of the Codes of Good Practice. The transaction must result in black ownership being recognised for B-BBEE purposes. This can arise through a share acquisition or a qualifying sale of a business or assets. The enquiry therefore concerns the effect of the transaction, even where improving B-BBEE ownership was not the parties’ principal commercial objective. Equity equivalent arrangements for multinational companies under Statement 103 are excluded.

Once the transaction falls within this definition, its value must be assessed against the R25 million threshold. The relevant amount is the transaction value, excluding administration, professional and legal fees, rather than the company’s turnover. For transactions recognised under Statement 102, the notice refers to the value of the sale of the asset, business or equity instrument.

Determining that value may require closer consideration where the purchase price is discounted, payment is deferred or the seller finances the acquisition. In these circumstances, parties should obtain valuation advice rather than assume that the amount paid on signature determines whether registration is required.

‍

The registration process

Under regulation 18(1) of the B-BBEE Regulations, a qualifying transaction must be submitted within 15 calendar days of its conclusion, using Form B-BBEE 18.

Where several parties participate, the transaction must be registered collectively. It is therefore sensible for the agreements to identify from the outset who will coordinate the submission and require all parties to provide the information required for registration.

The supporting documents should explain both the transaction and the resulting ownership arrangements. They generally include a transaction description, the signed transaction documents, ownership diagrams and the measured entity’s B-BBEE certificate or sworn affidavit, where applicable. The Commission’s Explanatory Notice 1 of 2024 provides guidance on the registration process and the documents needed to explain the transaction, its funding and the resulting ownership structure.

Once the registration requirements are met, the Regulations provide for a registration certificate within 10 days. The certificate confirms registration of the transaction. It does not approve the ownership structure or establish entitlement to the B-BBEE points claimed.

The Commission may assess compliance within 90 days after registration and communicate concerns to the parties. The parties must then take steps to address those concerns within a reasonable period, failing which an investigation may follow.

Failure to register should not be confused with fronting or misrepresentation. A missed deadline does not automatically establish either offence. Nevertheless, the Commission may investigate non-compliance and seek appropriate court relief. Where a person knowingly misrepresents B-BBEE status, supplies false information or engages in fronting, separate criminal provisions may apply, carrying substantial fines, imprisonment and restrictions on doing business with the State. These powers and penalties are addressed in sections 13J, 13O and 13P of the B-BBEE Act.

‍

Late filing

Where a filing is overdue, the parties should promptly submit the outstanding documents and request condonation, explaining the reason for the delay. Regulation 4 permits the Commissioner to condone late performance on good cause shown, but this relief is discretionary.

‍

Planning for registration

Registration is best managed as part of the main transaction timeline, with responsibility allocated and supporting documents prepared before the transaction documents are signed. At the same time, the ownership and funding arrangements should be reviewed to ensure that they support the intended B-BBEE recognition. Addressing both aspects from the outset reduces the prospect of having to revisit an implemented transaction when compliance concerns arise.