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Reportable transactions

I. Introduction

Broad-Based Black Economic Empowerment (B-BBEE) aims to achieve meaningful economic participation by black South Africans. To monitor progress and prevent fronting, certain significant B-BBEE transactions, known as “Major B-BBEE transactions,” are required to be reported to the B-BBEE Commission. This article explains what constitutes a reportable transaction, when the reporting requirement applies, the process involved, and where to find information on these transactions. The focus is on transparency and ensuring that B-BBEE contributes to genuine economic transformation.

II. What are Reportable Transactions (Major B-BBEE Transactions)?

A “Major B-BBEE transaction,” often referred to as a “reportable transaction,” is defined in the B-BBEE Act and its Regulations. It refers to any transaction that meets both of the following criteria:

  1. Relates to Ownership: The transaction must involve the Ownership element of the B-BBEE scorecard. This means it involves the sale of shares, businesses, assets, or other equity instruments that result in a change in the B-BBEE ownership profile of an entity.
  2. Threshold: The transaction value must be equal to or above R25 million.

Key Types of Transactions that are Usually Reportable (if they meet the R25 million threshold):

  • Sale of Shares: A company selling shares to a black individual or a black-owned company.
  • Sale of a Business: Transferring ownership of a business or a division to a black-owned entity.
  • Sale of Assets: Selling significant assets (e.g., property, equipment) to a black-owned entity, where this transfer significantly impacts the seller’s B-BBEE ownership score.
  • Establishment of Trusts: Creating a trust that holds shares for the benefit of black beneficiaries, if the value of the shares meets the threshold.
  • Broad-Based Ownership Schemes (ESOPs): Implementing an Employee Share Ownership Plan or other broad-based scheme that results in black ownership.
  • Joint Ventures: Forming a joint venture where the B-BBEE ownership component meets the threshold.
  • Mergers and Acquisitions: If the merger or acquisition results in a change in B-BBEE ownership and meets the value threshold.
  • Private Equity Acquisitions: If a private equity fund with black beneficiaries acquires a stake in an entity and the value meets the threshold.

III. When Does the Reporting Requirement Apply?

The reporting requirement applies at the time of the transaction. Specifically, parties to a Major B-BBEE transaction must register the transaction with the B-BBEE Commission within 30 days of the transaction’s conclusion. The “conclusion” is generally understood to be the date when all suspensive conditions have been fulfilled and the transaction becomes effective.

IV. The Reporting Process: How to Register a Major B-BBEE Transaction

The B-BBEE Commission provides a specific form (Form B-BBEE 18) for registering Major B-BBEE transactions. The process generally involves:

  1. Obtain the Form: Download Form B-BBEE 18 from the B-BBEE Commission’s website: https://www.bbbeecommission.co.za/ (look under “Forms” or “Resources”).
  2. Complete the Form: The form requires detailed information about the transaction, including:
    • Parties Involved: Names, registration numbers, and contact details of all parties (seller, buyer, beneficiaries).
    • Transaction Description: A clear description of the transaction (e.g., sale of shares, sale of business).
    • Transaction Value: The total value of the transaction.
    • B-BBEE Ownership Details: The B-BBEE ownership profile of the entities involved before and after the transaction, including percentages of black ownership, black women ownership, and designated group ownership.
    • Financing Details: How the transaction was financed (e.g., own funds, loan, vendor financing).
    • Supporting Documents: The form specifies which documents must be submitted, which typically include:
      • Shareholding agreements
      • Share certificates
      • Trust deeds (if applicable)
      • Loan agreements (if applicable)
      • Financial statements
      • B-BBEE certificates of the entities involved
      • Independent valuation report (in some cases)
  3. Submit the Form and Documents: The completed form and supporting documents must be submitted to the B-BBEE Commission, usually electronically via email or through an online portal (if available).
  4. Acknowledgement of Receipt: The Commission will issue an acknowledgement of receipt.
  5. Assessment by Commission: The B-BBEE Commission will assess the transaction using the information supplied.
  6. Possible Requests for Further Information: The Commission may request further information.
  7. Certificate of Registration: If all is in order, the Commission will issue a certificate.

V. Consequences of Non-Compliance

Failure to register a Major B-BBEE transaction within the 30-day timeframe is a contravention of the B-BBEE Act. This can lead to:

  • Penalties: The B-BBEE Commission can impose penalties.
  • Investigations: The Commission may launch a full investigation into the transaction.
  • Fronting Indication: Non-registration can raise a red flag, potentially leading to a fronting investigation.
  • Reputational Damage: Non-compliance can damage the reputation of the parties involved.
  • Criminal Charges: In severe cases.

VI. Where to Find a List of Major B-BBEE Transactions

The B-BBEE Commission maintains a registry of Major B-BBEE transactions. This registry is not a publicly accessible, searchable database in the way a company register might be. However, the Commission publishes information about registered transactions in its annual reports.

  • B-BBEE Commission Annual Reports: The primary source of information. These reports typically include:
    • The total number of registered transactions.
    • A breakdown of transactions by sector.
    • Aggregated statistics on the value and impact of transactions.
    • Sometimes, summaries of selected transactions (anonymized to protect confidential information).
    • These reports are available on the B-BBEE Commission’s website (https://www.bbbeecommission.co.za/) under “Publications” or “Annual Reports.”
  • News Articles and Industry Publications: Business news outlets and industry publications often report on significant B-BBEE transactions, particularly those involving listed companies or large private deals. However, this is not a comprehensive or systematic source.
  • Direct requests to the B-BBEE Commission: While not providing a full list, the Commission may provide information on specific transactions upon request, subject to confidentiality and data protection considerations.

VII. Conclusion

The requirement to register Major B-BBEE transactions is a crucial mechanism for promoting transparency and accountability in B-BBEE. It allows the B-BBEE Commission to monitor the flow of ownership and ensure that transactions contribute to genuine economic transformation. Businesses involved in transactions that meet the ownership and threshold criteria must comply with the reporting requirements to avoid penalties and contribute to the integrity of the B-BBEE system. While a fully public, searchable database of all transactions isn’t available, the B-BBEE Commission’s annual reports provide valuable insights into the trends and impact of these transactions.

Chapter: Verification & the B-BBEE commission:
Chapter: Verification & the B-BBEE commission:
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