BEE Commission to face its biggest challenge and set precedent

The B-BBEE Commission is about to set a precedent which will decide the validity of what, to date, have been questionable BEE transactions.

The B-BBEE Act states that the B-BBEE Commission must maintain a registry of major transactions. Regulations issued in 2017 defined a major transaction as a deal worth more than R25million. Regulations issued earlier in 2016 stated that the B-BBEE Commission must not only maintain a register, but also “may within 90 days after the broad-based black economic empowerment transaction has been registered with it, assess the transaction to determine adherence to the Act”.

We would expect the Commission to evaluate all transactions in this early phase.  The Commission has the right to instruct any verification agency to deny BEE points if a transaction is not approved and recently requested details of all BEE transactions above R25 million backdated to 24 October 2014.

If certain deals do not provide net value to black participants, the B-BBEE Commission is expected to reject the transactions.

To date, we understand that the Commission has received details of about 144 BEE transactions. Their job now is to approve or reject each deal. This is an immense task, and most likely many of the deals presented to the BEE Commission will lack some detail, which means that the BEE Commission is going to have to reject many deals, or request more information.

The BEE Commission may have to request multiple pieces of information which will take time and resources. There is a third option, they may give a cursory glance at any deal and approve it if it looks acceptable, without seeing the detail.

Whatever the BEE Commission decides with regard to any one deal, it will set a precedent for similar deals. If one transaction is approved and another rejected based on the same criteria, the Commission will end up in court.

The Commission may choose to reject a deal, in which case the entity may choose the legal route and many deals could land in court, further slowing the process.

Alternatively, the Commission may approve a deal without the benefit of all the data and rely on verified information without checking.  As a result, the Commission may approve deals that do not meet the requirements of the Act, especially those verified by verification agencies in 2014. Whatever the Commission does, it will set a precedent.

The requirement to approve or reject transactions is therefore forcing the BEE Commission to give an opinion which until now, there has been no clear direction. This hopefully will bring to a conclusion the ongoing dilemma being experienced by companies and verification agencies.

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