Couple face criminal charges due to fronting.

In a classic case of fronting, the owners of a panel-beating shop could face criminal charges, blacklisting by Treasury from getting government tenders and an investigation by the Companies and Intellectual Property Commission for violating the Close Corporations Act.

The B-BBEE Commission found that Willie and Petronella Saunders were trying to divert profits earned by Elegant Square Panelbeaters to ESP Body Repairers – an entity they created “with prejudice to the business of [Elegant Square] and Masana”.

The commission found the couple breached an agreement they had with Masana by making changes and company decisions without involving him and that they misrepresented the B-BEEE status of Elegant Square Panelbeaters.

“They attempted to intimidate and/or influence the commission in the exercise of its powers by making unfounded allegations of bias, which they failed to provide evidence of.”

Tusker writes:

The BEE Act must be complied with in letter and in spirit. We’ve no doubt that are many ‘BEE deals’ like this in existence and that fronting is rife. These deals lead the business, directors and shareholders open to risk, litigation and potential criminal charges. They are simply not worth it. Especially when viable alternatives exist – for example the Tusker structure – which doesn’t destroy any shareholder value in the process of a BEE ownership deal and complies 100% with letter and spirit of the BEE Act…