What you need to know about the new BEE Regulations

“I see in the news that new BEE Regulations are now in force. It there anything I must be aware of for my business?”

The new Broad-Based Black Economic Empowerment Regulations (“Regulations”) came into effect on 6 June 2016. Whilst these regulations mainly set out how the newly created BEE Commission is to function and how complaints and other information are to be dealt with, there are some aspects which businesses should take note of.

The first notable aspect is the registration of transactions. The Regulations require that any party entering into a major broad-based black economic empowerment transaction that is above the threshold determined by the Minister by notice in the Government Gazette, has to submit the transaction to the Commission for registration within 15 days of concluding such transaction. Thereafter the Commission will, within 90 days, assess the transaction to determine adherence to the Broad-Based Black Economic Empowerment Act (“Act”).

The Commission may then advise a party who submitted such transaction for registration as to any concern regarding the transaction, whereafter such party has to take steps to remedy the transaction within a reasonable period, failing which the Commission may proceed to initiate an investigation in terms of the Act.

At this stage various uncertainties arise in this regard. The question as to what would constitute a major broad-based economic empowerment transaction is currently left open, as the Minister has not yet published the threshold notice, thus compliance with this regulation is at present not required. Once the threshold has been determined, various other issues will need further clarification such as defining what constitutes a broad-based economic empowerment transaction, as well as clarifying what is meant by ‘adherence to the Act’.

It should also be noted that the requirement for registration does not constitute the requirement to obtain approval from the Commission before the transaction can be implemented.

A further aspect is the requirement that all companies listed on the JSE have to submit an annual compliance report to the Commission. Such compliance report has to be submitted to the Commission within 90 days after the company’s financial year end, or where such report is included in the audited financial statements and annual report, within 30 days of the approval of such audited financial statements and annual report.The Commission will then consider the report, and provide a written response as to the state of compliance with the Act and highlight areas of improvement.

In the case of non-compliance with the Act, the Commission will notify the company and the company will be required to correct its report and ensure compliance within 30 days. If a company fails to comply, the Commission must reject any submitted compliance report and the company will then be considered not to have complied with the requirements of the Act.  

The remainder of the Regulations deal with the functions of the Commission, the setting out of the complaint process, access to information and certain other administrative details, as well as reporting obligations similar to that of listed companies which are also imposed on all spheres of government, public entities, organs of state, or SETAs. Interestingly, the Regulations do not contain any criteria for the issuing of licenses, concessions and other authorizations, as was included in the draft Regulations published in February 2016. 

The last provisions of which businesses that deal with an organ of state or public entity should take note of is that the Regulations now provide for a procedure where such organ of state or public entity may apply to the Minister for permission to exceed the qualification criteria for procurement and other economic activities. A procedure is also set out for organs of state or public entities to apply for exemption or deviation from applying the BEE Codes of Good Practice. This may have an effect on the level of compliance required from a company in order to continue supplying to a specific state organ or public entity.

Whilst most of the new Regulations are procedural in nature and would not impact your business, we do advise that the assistance of a BEE consultant be obtained to assist you should you be contemplating a BEE transaction which might be a major black economic empowerment transaction.

August 11, 2016
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