How Employee Share Trusts can score Level 1 B-BBEE
A B-BBEE consultant got me thinking along these lines.
He said that rather than have the Black Employee Share Trust own 51% of the Measured Company, it should rather own 100% of an intermediate company which in turn owns the 51%.
The Modified Flow Through Principal then allows the Measured Company to be deemed to be 100% black owned, scoring Level 1.
Now, I don’t believe anything that any “expert” says, so I checked the Codes (I always go to source).
Here’s what I found
So, by my reading, the traditional structure on the right scores Level 1 and not Level 2 as is generally believed.
So, can we use this principle to completely get around the level 2 problem like this?
Let’s again go back to source.
The Codes say “people” not “person”. Stupid, I know, but that means that it won’t work.
However, if you had two black partners owning jointly 51%, then the structure would giving you a Level 1.
This sort of rubbish is the reason that I stopped my registration as a B-BBEE auditor when the new Codes came out.
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Very crisp and clear once again, Derek. I’m not convinced a structure will be disqualified for the “people” vs. “person” distinction. There is no specific limitation in the MFT definitions to the number of black people. In the context “black people” is a group identifier, not a numerical specification.
Some of us are still assigned to trying to make a living helping honest corporate citizens through the quagmire 🙂
Hi Fred,
Good to hear from you after all these years. The issue of “person” vs “people” is typical of the garbage that the Codes contain. They took years writing those “new” codes and one read through led me to resign as a B-BBEE auditor. If you recall it wasn’t long after that that the Independent Regulatory Board for Auditors pulled out as well and dumped the whole load of poop back into SANAS’lap where it remains to this day.