Industry Charters > Financial Services Charter > Code Series FS100: Measurement of the Ownership ... > Statement 100: The General Principles ... > 3. Key measurement principles

3.5.1

Any sale or loss of shares that have occurred on or prior to 31 December 2010 shall be subject to the continuing consequences formula as per paragraph 5 of Annexe 100(C) of this Financial Sector Code.

3.5.2

In addition, a Measured Entity is allowed to recognise a portion of black ownership after a black participant has exited through the sale or loss of shares where such sale or loss occurs after 31 December 2010. The portion recognisable where such sale or loss occurs after 31 December 2010 is as follows:

3.5.2.1

In the event of a dilution in the actual percentage of black ownership in a Measured Entity (such dilution having occurred on or after 1 January 2011 ), as a result of black participant(s) electing to sell their shares and realise the net value attributable to those shares when those shares have become eligible for sale or transfer, any such dilution, will for the purposes of this Financial Sector Code, not result in a dilution of the percentage Black Ownership claimed under the Scorecard contained under paragraph 2, Table 2a above. B-BBEE participants should be encouraged to sell the realisation shares to other Black Participants and, where possible, a measured entity should attempt to provide assistance to B-BBEE participants to sell to other B-BBEE participants. For avoidance of doubt, such assistance is not to be interpreted as the provision of financing (debt or other) to the proposed buyer.

3.5.2.2

In the event of a dilution in the actual percentage of black ownership in a Measured Entity, such dilution having occurred on or after 1 January 2011 as a result of all other sales of shares, other than the sale of shares described under paragraphs 3.4.7 or 3.5.2.1 above, a portion of the percentage may be recognisable subject to the following criteria:

•	The black participant has held those shares for a minimum period of three years;

•	Net value must have been created in the hands of Black People. (i.e. a portion of the debt acquired to purchase the equity must have been repaid or the selling price of the shares must be higher than the purchase price);

•	Transformation has taken place within the measured enterprise.

3.5.3

The formula for calculating continued recognition (for sales of shares) in circumstances as contemplated under paragraph 3.5.2.2 is contained under paragraph 5 of Annexe 100(C) of this Code Statement and black participation arising from continued recognition of black ownership cannot contribute more than 40% of the score on the ownership scorecard.

3.5.4

In the case of a loss of shares by the black investor, the following additional rules apply:

3.5.4.1

A written tripartite agreement between the Measured Enterprise, the black participant and a lender must record the loan or security arrangement, unless the Measured Entity is the lender; and

3.5.4.2

The period over which the points were allocated or recognisable will not exceed the period over which the shares were held.

3.5.5

The Ownership points under paragraph 3.5.4 (a loss of shares, unless that loss of shares is outside the control of the measured entity) that are attributable to the Measured Entity will be calculated by multiplying the following elements:

3.5.5.1

The value created in black hands as a percentage of the value of the Measured Entity at the date of the loss of shares as a percentage of the Measured Entity's value;

The formula for measuring the percentage of continued recognition is as follows:

A = B x C x D

Where:

A is the continued recognition after the loss of shares

B is the percentage ownership for each of the indicators in the ownership scorecard held immediately prior to the loss

C is the Net Value as per formula "Loss 1" below

D is the most recent B-BBEE recognition Level of the Measured entity (not more than one year old based on all elements excluding ownership).

Formula: Loss 1:

A = (B-C) / D

Where:

A is the Deemed Net Value

B is the value of the lost shares as at the date of loss

C is the carrying value of any debt in relation to the lost shares as at the date of loss

D is value of the measured entity as at the date of loss

3.5.5.2

The B-BBEE status of the Measured Entity based on the balanced scorecard at the date of measurement; and

3.5.5.3

The ownership points that were attributable to the Measured Enterprise on the date of sale or loss.

3.5.6

In addition to paragraphs 3.5.2 to 3.5.5, prior to 1 January 2015 a Measured Entity shall be entitled (but not compelled) to report, for every year of measurement, the points calculated in terms of its Ownership scorecard as at 31 December 2010. After 31 December 2014, this dispensation shall not be applicable.

All the measurement principles and special dispensations contained in this Code Statement shall always be applicable.

Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Industry Charters

Financial Services Charter

Code Series FS100: Measurement of the Ownership Element of Broad-Based Black Economic Empowerment

Statement 100: The General Principles for Measuring Ownership

3. Key measurement principles

3.5 The recognition of ownership after the sale or loss of shares by Black Participants