For businesses that want to maintain and improve BEE rating under the general codes of good practice, securing black ownership is the key.

One of the objectives of the Broad-Based Black Economic Empowerment Act is to facilitate a change in the racial composition of business ownership.

In line with this, ownership holds the second-highest weighting on the generic scorecard in the codes.

Under the codes the target for black “voting” control of an entity is 25 percent plus “one vote”. This is a magic number in corporate governance because many decisions which affect the ownership structure of a company need approval by 75 percent of the voting rights. Therefore the “one vote” is a swing vote.

The target for black economic interest under the codes is 25 percent. A black person holding 25 percent of the ordinary shares in a company or members’ interest in a close corporation should be entitled to 25 percent of the dividends.

There are many ways for black people to take up an ownership stake in an existing business.

For example, a form of discretionary family trust may be used. A family trust is useful for estate planning. Selected assets are handed over to the trustees to administer for the benefit of the estate planner’s family. The family members are taxed individually on what they receive. Another means permitted by the codes is a business trust in which the beneficiaries have fixed interests and the trustees have to distribute income according to the fixed proportions.

Although the trust is treated as a separate person in some ways, the beneficiaries are taxed individually on income received through the trust.

Some businesses might want to move a division of their operations into a new entity which is fully or partly blackowned and satisfy the ownership element of the codes in this way.

The codes provide formulas for the selling entity to be given points for ownership even though the black ownership will be in the new entity, not the selling entity.

The aim must be to create an independent, sound and sustainable new entity.

Where a business wants to incentivise its employees it can form a trust for the benefit of certain employees and transfer an ownership stake to the trust.

Likewise, if a business operates within or near a community, it can form a nonprofit company or community trust and transfer an interest for the benefit of the community members.

These entities must satisfy stringent criteria to be recognised for ownership purposes.

Under the codes, black ownership is discounted if the black owners are permanently indebted.

If the cost of acquiring ownership is not paid off in increments from day one and steadily over 10 years then the business stands the risk of being automatically dropped a full level on its BEE rating.

Black ownership of business is becoming imperative across the board. Provided the codes’ requirements for different ownership vehicles are met, there are many roads to securing it.