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

Annexe 100(B): Rules on Certain Types of Enterprises
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1.Rules for Broad-Based Ownership Schemes

 

1.1The following rules apply to Broad-Based Ownership Schemes:

 

1.1.1The management fees of the scheme must not exceed 15%;

 

1.1.2The constitution of the scheme must record the rules governing any portion of economic interest received and reserved for future distribution or application;

 

1.1.3At least 85% of the value of benefits allocated by the scheme must accrue to Black People;

 

1.1.4At least 50% of the fiduciaries of the scheme must be independent persons having no employment with or direct or indirect beneficial interest in the scheme;

 

1.1.5At least 50% of the fiduciaries of the scheme must be Black People and at least 25% must be Black Women;

 

1.1.6The chairperson of the scheme must be independent; and

 

1.1.7On the winding-up or termination of the scheme, all accumulated Economic Interest must be transferred to beneficiaries or an entity with similar objectives.

 

2.Rules for Employee Share Ownership Schemes

 

2.1The following rules apply to Employee Share Ownership Schemes (ESOP):

 

2.1.1The scheme constitution must define the participants and the proportion of their claim to receive distributions;

 

2.1.2A written record of the name of the participants or the use of a defined class of natural person satisfies the requirement for identification;

 

2.1.3A written record of fixed percentages of claim or the use of a formula for calculating claims satisfies the need for defining proportion of benefit; and

 

2.1.4The fiduciaries of the scheme must have no discretion on the above-mentioned terms;

 

2.2The participants must take part in:

 

2.2.1Appointing at least 50% of the fiduciaries of the scheme;

 

2.2.2Managing the scheme at a level similar to the management role of shareholders in a company having shareholding;

 

2.2.3The constitution, or other relevant statutory documents of the scheme must be available, on request, to any participant in an official language in which that person is familiar; and

 

2.2.4All accumulated Economic Interest of the scheme is payable to the participants at the earlier of a date or event specified in the scheme constitution or on the termination or winding-up of the scheme; and

 

2.2.5The scheme fiduciaries must present the financial reports of the scheme to participants yearly at an annual general meeting of the scheme.

 

3.Rules for Trusts

 

3.1The qualification criteria for the recognition of Trusts are as follows:

 

3.1.1The trust deed must define the beneficiaries and the proportion of their entitlement to receive distributions;

 

3.1.2A written record of the names of the beneficiaries or the use of a defined class of natural person satisfies the requirement for identification;

 

3.1.3A written record of fixed percentages of entitlement or the use of a formula for calculating entitlement satisfies the need for defining proportion of benefit; and

 

3.1.4The trustees (including trustees of a family trust that will qualify provided that the Trust deed stipulates that the Beneficiaries must be Black South Africans and that at least 85% of the proceeds of the Trust accrue to the beneficiaries) must have no discretion on the above mentioned terms, and on winding-up or termination of the trust, all accumulated Economic Interest must be transferred to the beneficiaries or to an entity representing the interest of the participants or class of beneficiaries.

 

4.Additional Criteria Applicable to Trusts:

 

4.1For a Measured Entity to obtain the maximum points on its Ownership scorecard from shareholding by a Trust, the Measured Entity must be in possession of a certificate issued by a competent person to the effect:

 

4.1.1That the Trust was created for a legitimate commercial reason, which must be fully disclosed; and

 

4.1.2That the terms of the Trust do not directly or indirectly seek to circumvent the provisions of the Codes and the Act.

 

5.Additional Criteria Applicable to Broad-Based Ownership Schemes and Employee Ownership Schemes:

 

5.1For a Measured Entity to obtain the maximum points on its ownership scorecard, the following additional requirements must be met by a Broad-Based Scheme or Employee Share Ownership Scheme:

 

5.1.1A track-record of operating as a Broad-Based Ownership Scheme or Employee Share Ownership Scheme, or in the absence of such a track-record demonstrable evidence of full operational capacity to operate as a Broad-Based Ownership Scheme or Employee Share Ownership Scheme

 

5.1.2Operational capacity must be evidenced by suitably qualified and experienced staff in sufficient number, experienced professional advisors, operating premises and all other necessary requirements for operating a business.