The Mining Charter, published in August 2014, required all mining companies to achieve 26% black ownership within 10 years.

The BEE Act and Codes followed in 2007 and applied to all sectors of the economy. Although first voluntary, the BEE Act stipulates that the state is obliged to take the Codes into ac­count when issuing licences or granting concessions. The Act was substantially amended in 2013 and this year and the Codes have been updated. Ownership provides 2.3.8% of the points.

The new compliance tar­get is that the voting rights of black shareholders are 2.5 % plus 1. Most of the large corporates have already been restructured. The focus has now twned to medi­wn and smaller businesses. It will be a top priority for 2016. How is this best achieved and what are the issues which need to be taken into account? The first step is to choose a BEE partner. Should this be a black businesman who adds strategic vaue? If so, ideally it should be a black woman. Will the investor be active or passive? Should the employees be included through will employee trust? What about a charitable trust focused on black beneficiaries? New entrants attract more points.

Any trust, whether it be a familiar charitable or employee trust, needs to be carefully structured to comply with the Codes. Some trusts are formed to benefit conununities, particularly if the company con­ducts operations in rural areas. In most cases, the BEE shareholders are best housed together in a com­pany where the modified flow through principle of the Codes can be applied.

This deems the compa­ny to be 100% black owned if the majority of the shares are indirect­ly held by black people. The financing of a BEE transaction has become much more com­plicated. Vendor financing is re­ quired in majority cases. Here the business provides financial support to the BEE investm: The debt at­tached to the investment held by the BEE shareholder needs to reduce, broadly, by 10% per year otherwise significant points are lost. The pro­visions of the Companies Act need to be carefully complied with if the company, itself, provides finance for the acquisition of its own shares.

Tax also has an important role to play. Selling shares incurs capital gains tax. Often, it is better to issue new shares. The corporate structur­ing provisions of the Income Tax Act can be used where the BEE shareholding is less than 30%. This can be achieved through the sale of a business between companies within a group, asset for share swaps and soon. Importantly if em­ployees receive dividends from an employee trust, the dividends are deemed to be income and income tax on the dividends must be de­ducted by the employer.

Whatever the structure, it needs to be flexible. Over the years, the BEE rules have changed and are likely to continue to change. The BEE participants must agree up front to any restructuring which may be required in the future to en­ n sure that maximum poits are earned.