Much has been said in the media about the use of community trusts as part of Broad-Based Black Economic Empowerment (“B-BBEE”) ownership schemes not complying with the law and therefore constituting fronting practices. This was largely as a result of comments made by the Commissioner of the Broad-Based Black Economic Empowerment Commission (“B-BBEE Commission”), Ms Zodwa Ntuli, during the course of 2019 in an interview where she stated that most community trusts were non-compliant with the law and did not result in genuine and effective black ownership. The B-BBEE Commission also published a brochure with their guidelines as to how trusts should be used in the B-BBEE context which has caused much confusion.
In this article, we examine the legal principles laid out in the B-BBEE legislation relating to broad-based ownership schemes and the interpretation thereof in light of the trust law of South Africa.
- WHO IS THE B-BBEE COMMISSION AND WHAT ARE THEIR POWERS?
- The B-BBEE Commission is an entity established by the Broad-Based Black Economic Empowerment Act 53 of 2003 as amended by Act 46 of 2013, to oversee the implementation of the Act, which includes provision of explanatory notices, non-binding advisory opinions and clarification services to improve the understanding of the Act.
- The B-BBEE Commission has also been established to ensure compliance with the rules and regulations of the Broad-Based Black Economic Empowerment Act of 2003 (“the B-BBEE Act”).
- Section 13 of the B-BBEE Act governs all aspects pertaining to the B-BBEE Commission, including its establishment and functions. A few of these functions can be listed as follow:
- To oversee, supervise and promote adherence to the B-BBEE Act in the interest of the public;
- To strengthen and foster collaboration between the public and private sector in order to promote and safeguard the objectives of B-BBEE;
- To receive complaints relating to B-BBEE in accordance with the B-BBEE Act;
- To investigate, either on its own initiative or in response to complaints received, any matter concerning B-BBEE.
- In terms of Section 13F (1) (d) read with Section 13J of the B-BBEE Act, the Commission has the power to investigate, either on its own initiative or in response to a complaint received, any matter concerning B-BBEE.
- The mandate of the B-BBEE Commission in fact includes the obligation to investigate a matter if it believes that there is a breach of the “non-fronting” requirement and the B-BBEE Commission can refer such matter to the prosecuting authority if they should find that there has been a breach. Should the prosecuting authority decide to prosecute, the matter will from thereon fall within the criminal domain and the usual criminal procedures will follow.
- If an entity is found to have violated the B-BBEE Act, that entity could be fined up to 10% of its annual turnover, and individuals involved could be imprisoned for up to 10 years and/or fined.
- It should however always be remembered that the B-BBEE Commission is a creature of statute and that it is bound by the principle of legality. Hoexter explains that the fundamental idea underlying the principle of legality is that the legislature and executive in every sphere of government are constrained by the principle that they may exercise no power and perform no function beyond that conferred by law. They may only act within the powers lawfully conferred on them and the exercise of public power is only legitimate when it is lawful.
- In Pharmaceutical Manufacturers Association of SA (In re Ex parte President of the Republic of South Africa and others 2000 (2) SA 674 (CC)) the Constitutional Court held that the exercise of public power must be lawful and it must not be arbitrary or irrational. This principle was also enunciated by the Constitutional Court in Fedsure Life Assurance v Greater Johannesburg Transitional Metropolitan Council (1999 (1) SA 374 (CC), paras  – ). The court pointed out that the principle that an organ of state – in that case, a local government – may only act within the powers lawfully conferred upon it, is a fundamental principle of the rule of law, that the exercise of public power is only legitimate where lawful. The court held that there is no doubt that the common law principles of ultra vires remain under the new constitutional order, but they are underpinned (and supplemented where necessary) by the constitutional principle of legality.
- The B-BBEE Commission is therefore constrained to act within the four walls of the B-BBEE Act, read with the promulgated Codes and Regulations. The B-BBEE Commission does not have the power to amend legislation unilaterally and without intervention of parliament and it cannot follow an interpretation of the legislation which is arbitrary or irrational.
- The B-BBEE Act in Section 13F(3)(b)(ii) states that the function of the B-BBEE Commission includes providing guidance to the public on the interpretation of the B-BBEE legislation, by issuing non-binding opinions relating to any provision of the B-BBEE Act. The B-BBEE Commission has published a number of these opinions in the forms of brochures, including the brochure on the interpretation of the rules relating to the use of trusts as part of a BBOS. Although this brochure stipulates the current position that the B-BBEE Commission has taken with regard to trusts and the implementation thereof, this brochure is always subject to B-BBEE legislation, and if inconsistent with it, it will be invalid and unenforceable.
- THE GENERAL B-BBEE REQUIREMENTS APPLICABLE TO RIGHTS OF OWNERSHIP
- The discussion in this section is based on the following:
- The B-BBEE Act;
- the B-BBEE Codes of Good Practice promulgated under the B-BBEE Act (“the B-BBEE Codes”);
- the B-BBEE Regulations issued pursuant to Section 14 of the B-BBEE Act (“the B-BBEE Regulations”).
- It is important to note, when one is interpreting B-BBEE legislation, that substance will always take precedence over legal form and if there is any vagueness or uncertainty, one should always keep the objectives and spirit of B-BBEE in mind and find a reasonable interpretation of the legislation consistent therewith.
- The B-BBEE Codes provide a framework, in the form of a “scorecard”, for the measurement of B-BBEE for certain sectors and industries operating within the South African economy and seeks to regularise such sectors and industries by providing criteria for the measurement of B-BBEE. The B-BBEE Codes provide a scorecard with 5 elements for which a measured entity can score points and a measured entity is then given a B-BBEE rating based on the score achieved. These elements include ownership, management control, skills development, enterprise and supplier development and socio-economic development initiatives.
- One of the manners in which the legislation allows for the ownership element to be achieved is through the use of a BBOS.
- The legal basis of a BBOS is that the beneficiaries under such scheme do not hold the shares directly in the measured entity, but rather the shares are held by a legal entity such as a trust. The trust acts as the “vehicle” through which the beneficiaries hold their shares in the measured entity. Because of this structure, the beneficiaries are not shareholders in their personal capacities, as the trust is regarded as the shareholder and the beneficiaries will benefit through the distribution from the measured entity through the trust to them.
- The legislative basis for the use of a BBOS as part of the ownership structure for a measured entity is found in the B-BBEE Codes that provide that black people may hold their rights of ownership in a measured entity as direct Participants or as Participants through some form of entity such as a BBOS (an “Eligible Vehicle”).
- This therefore makes it clear that the Participants do not have to hold the rights of ownership directly, which in turn implies that the Rights of Ownership will be held by the Eligible Vehicle in question and therefore measured at that level.
- It is important to note the definitions of certain important terms used above as this will impact the interpretation of the B-BBEE legislation relating to BBOS’s.
- “Rights of Ownership” is defined in the B-BBEE Codes as, collectively, the right to “Economic Interest” and the right to “Exercisable Voting Rights”. These terms are, in turn, defined as follows:
- “Economic Interest” – a claim against an entity representing a return on ownership of the entity similar in nature to a dividend right; and
- “Exercisable Voting Rights” – a voting right of a “Black Participant” that is not subject to any limit.
- “Participant” is then defined in the B-BBEE Codes as a natural person holding “Rights of Ownership” in a company. This definition is obviously subject to the B-BBEE Codes mentioned above providing for the use of the “Eligible Vehicle”.
- As it has been established that a measured entity is allowed to make use of a BBOS as part of its ownership structure, it is now necessary to look at the requirements that this BBOS must meet in order to comply with the B-BBEE legislation.
- THE B-BBEE REQUIREMENTS FOR BROAD-BASED OWNERSHIP SCHEMES
- We believe the confusion relating to a BBOS, and especially the broad-based community trust, has its origin in the concerns the B-BBEE Commission has expressed on the validity of these trusts and especially the interpretation of the concepts of “voting rights” and “economic interest”.
- In order to count B-BBEE trusts as black ownership vehicles, the B-BBEE Commission is of the view that the following two fundamental ownership characteristics must be present, namely:
- IN RESPECT OF VOTING RIGHTS
- The B-BBEE Commission views the ultimate beneficiaries of a B-BBEE trust as the ultimate shareholders. Accordingly, if a measured entity is claiming black ownership by virtue of having, as shareholder, a trust with black beneficiaries, those beneficiaries must have the ability to direct the manner in which the trustees vote the underlying shares held by the trust. If the beneficiaries do not have such an ability, the trust would not result in true ownership in the hands of black people and, accordingly, cannot contribute towards the black ownership credentials of a measured entity.
- IN RESPECT OF ECONOMIC INTERESTS
- The B-BBEE Commission’s views in this regard are that there can be no conditions attached to the Economic Interest beneficiaries receive from the measured entity via the trust and such beneficiaries must have the discretion to utilise their economic benefits in whichever manner they wish. Conditions such as applying such Economic Interest for the payment of tuition fees in an educational trust would not result in true Economic Interest being accrued by black people and, accordingly, cannot contribute towards the black ownership credentials of a measured entity.
- It is our respectful opinion that the views of the B-BBEE Commission do not correspond with the B-BBEE legislation as it has been promulgated and also completely disregard the basic principles of trust law, as will be discussed below.
- As explained above, the B-BBEE Commission is a creature of statute and, as such, it is bound by the law that has created it. The B-BBEE Commission cannot apply principles which are not part of the legislation at it stands at present and it is bound to apply the law as it has been promulgated. The law relating to BBOS’s is clear and, as such, if a BBOS complies with the promulgated legislative requirements, the B-BBEE Commission does not have the right to deny the measured entity the use of same.
- As discussed in the previous section, the B-BBEE Codes state that “Participants” in Broad-Based Ownership Schemes holding “Rights of Ownership” may contribute to the B-BBEE ownership points of a company. Although the B-BBEE Commission seems to want to measure this at the level of the ultimate beneficiary of the scheme, it is our view that the legislation provides for measurement at the “Eligible Vehicle” level which accords with the basic principles of trust law.
- One must remember that the B-BBEE Codes allow that black people may hold their Rights of Ownership in a measured entity as direct Participants or as Participants through some form of entity such as a BBOS (the “Eligible Vehicle”). In Section 7 of the B-BBEE Codes it is then required that, if it is a trust which holds the Rights of Ownership in the measured entity, it must meet the qualifications of Annexure 100(B).
- The requirements under Annexure 100(B) for the BBOS to contribute a maximum of 40% recognition for the ownership element of the scorecard are as follows:
- The management fees of the BBOS must not exceed 15%;
- The constitution of the BBOS (the trust deed) must record the rules governing any portion of economic interest received and reserved for future distribution or application;
- The constitution of the BBOS (the trust deed) must define the beneficiaries and the proportion of their entitlement to receive distributions;
- A written record of the names of the beneficiaries or the use of a defined class of natural persons must satisfy the requirement for identification;
- A written record of fixed percentages of entitlement or the use of a formula for calculating entitlement must satisfy the need for defining the proportion of benefit;
- The fiduciaries of the BBOS (the trustees) must have no discretion on the above terms;
- At least 85% of the value of benefits allocated by the BBOS must accrue to black people;
- At least 50% of the fiduciaries of the BBOS (the trustees) must be independent persons having no employment with or direct or indirect beneficial interest in the BBOS;
- At least 50% of the fiduciaries of the BBOS (the trustees) must be black people and at least 25% must be black women;
- The chairperson of the BBOS must be independent;
- The constitution of the BBOS (the trust deed) must be available on request to any participant in an official language with which that person is familiar;
- The fiduciaries of the BBOS (the trustees) must present the financial reports of the BBOS to participants yearly at an annual general meeting of the BBOS;
- On winding‑up or termination of the BBOS, all accumulated economic interest must be transferred to the beneficiaries or an entity with similar objectives.
- The additional requirements under Annexure 100(B) for the BBOS to contribute 100% for the ownership element of the scorecard are as follows:
- the BBOS must have a track record of operating as a BBOS or, if it does not have a track record, “demonstrable evidence of full operational capacity” to operate as a BBOS;
- the operational capacity must be evidenced by suitably qualified and experienced staff in sufficient number, experienced professional advisers, operating premises and all other necessary requirements for operating a business.
- Based on the above, it is our view that the B-BBEE Legislation (as highlighted above) recognises that a trust which complies with the requirements in the B-BBEE Codes can constitute a black ownership vehicle which is able to contribute to the B-BBEE ownership credentials of a company if such vehicle, as opposed to its participants, holds “Rights of Ownership”.
- The Final Brochure on Trusts published by the B-BBEE Commission during November 2018 sets out the B-BBEE Commission’s interpretation of the B-BBEE Codes. The sentiments are raised therein that community trusts that have young black persons as beneficiaries do not meet the qualifying criteria of the B-BBEE Codes and result only in financial benefit, and not true ownership, and as such circumvent the very objectives of the B-BBEE Act. It is furthermore stated that minors should not be beneficiaries under these types of trusts, as they cannot exercise voting rights. Other statements made by the B-BBEE Commission on community trusts include that the beneficiaries must exercise voting rights, must receive the same economic benefits as other shareholders and must ultimately become unencumbered owners of the shares in which they are invested.
- The B-BBEE Commission’s view is that, in order for a trust to count towards the B-BBEE ownership credentials of a company, one must effectively look through the trust and test whether the black beneficiaries personally have the “Rights of Ownership” associated with the shareholding held by the trust in the company. In our view the correct interpretation is the one expressed above that measurement be done at “Eligible Vehicle” level, firstly because it is consistent with the B-BBEE Codes, and secondly because of the various requirements as to Eligible Vehicles contained in the B-BBEE Codes, which would be entirely irrelevant if the measurement of the achievement of the Rights of Ownership had to take place at Participant level rather than at the Eligible Vehicle level. By way of example, if Participant level were the correct level at which to make the measurement, it would matter little whether the trustees were black or white, because the voting would be determined by the Participants’ direction to the trustees. It would also be irrelevant that 50% of the trustees should be independent because, again, their voting would have to be determined by the Participants.
Further to the above, we will now continue to set out the relevant trust law principles which support the standpoint that the correct view is to measure the Rights of Ownership at Eligible Vehicle Level.
- TRUST LAW IN SOUTH AFRICA
- An inter vivos trust, such as a broad-based community trust, which forms the basis of this discussion, consists of a founder, trustees and beneficiaries and is based on the principle that the trustees administer the trust assets in a fiduciary capacity on behalf of the beneficiaries. The exact nature of the trust in the South African law has been a subject of debate in the courts, but the Appellate Court decision of Crookes v Watson finally held that the trust is similar to the stipulatio alteri where the founder and trustees contract for the benefit of the beneficiaries.
- In Braun v Blann and Botha the court continued to confirm that the trustees are regarded as the owners of the trust property but not for personal benefit, and upon termination of the trust the trustee will not in the capacity as such acquire any right to trust property. Instead, all the benefits under the trust will accrue to the income and capital beneficiaries of the trust as and when it vests in them. This position is confirmed in Section 12 of the Trust Property Control Act, that states that trust property do not form part of the personal estate of a trustee except insofar as that trustee is entitled to it as a trust beneficiary.
- A trustee acts in two capacities at all times. In his capacity as trustee, he holds an office and, within the ambit of his trusteeship, all his actions are related to that office. At the same time, he is a private individual, and like any other private person has attributes, rights, obligations and property, which are not related to the trust, which he administers. His official actions as trustee relate to the trust in which the fiduciary relationship attaching to trusteeship reigns supreme and is completely divorced from his private circumstances.
- The trustee is regarded as the owner of the trust property but without having any beneficial interest in the trust property. This distinction, between ownership and administration of the trust property on the one hand and enjoyment of the trust property on the other hand, forms the very basis of the trust in South African law – the trustee is vested with control of the assets of a trust, but he is mandated and obligated to administer the trust funds for the sole and exclusive benefit of the beneficiaries.
- The following case law is important in this regard:
- In Lupacchini NO and Another v Minister of Safety and Security, the court held that a trust that is established by a trust deed is not a legal person – it is a legal relationship of a special kind that is described by the authors of Honoré’s South African Law of Trusts as “a legal institution in which a person, the trustee, subject to public supervision, holds or administers property separately from his or her own, for the benefit of another person or persons or for the furtherance of a charitable or other purpose”.
- In Land and Agricultural Bank of South Arica v Parker, the court further explained that a trust is an accumulation of assets and liabilities. These constitute the trust estate, which is a separate entity, but, although separate, the accumulation of rights and obligations comprising the trust estate does not have legal personality. It vests in the trustees, and must be administered by them – and it is only through the trustees, specified as in the trust instrument, that the trust can act.
- It is therefore clear that beneficiaries in a trust do not have rights of administration – they are entitled to the enjoyment of the assets but do not have any say in the actual running of the trust affairs. This does not, however, mean that a beneficiary is without recourse or protection. A beneficiary is at all times entitled to call for information about the affairs of the trust, where the trust property is and how funds are invested, and the trustee is duty-bound to furnish such information.
- An interesting decision, relating to the question of beneficiaries being able to dictate the decisions of the trustees, is found in The PPWAWU National Provident Fund v The Chememical, Energy, Paper, Printing, Wood and Allied Workers Union 2008 (2) SA 351 (W). The applicant in the case was PPWAWU, a provident fund formed for the benefit of union members and their descendants. CEPPWAWU, the union, was the respondent. The rules of the fund clearly stipulated that management of the fund vests in the board of trustees of the fund. The trustees consisted of employers and members of the union.
- In 2002 the trustees decided to terminate the mandate of the fund managers. The union did not agree with this decision and accepted a resolution containing certain suggestions regarding the duties of the trustees of the fund. These suggestions would make the trustees answerable to the union and the members of the fund. This resolution provided further that, should a trustee not comply with these principles, he could be disciplined in terms of the rules of the union.
- In 2006 the trustees decided unanimously to change certain rules of the fund in order to reduce the effective control of the union and its member over the trustees. This amendment was deemed necessary to comply with certain promulgated provisions of the Pensions Fund Act. It was felt that the composition of the board of trustees at that stage was contrary to the provisions of the Pensions Fund Act and discriminatory against non-members of the fund. The union lodged and objection against the decision.
- In October 2006 the majority of the member-trustees received notices to appear in front of a disciplinary committee in this regard. The trustees on the other side objected against this, stating that compliance with the mandate of the fund, even if it is to the detriment of the members, would mean that a trustee would forsake his fiduciary duties. The legal question was whether the resolution adopted by the union was enforceable and in line with the public interest.
- The court held that the management of the fund vested in the trustees and the primary purpose of the fund was a payment of benefits to its members and beneficiaries. The trustees were limited to activities surrounding the property of the fund and to deal with such property for the benefit of other persons. This gave rise to a fiduciary duty. As is the case with company directors, legislation requires from each trustee to act independently in deciding what is in the best interest of the fund, notwithstanding the views of the people who appointed him as trustee. The resolution implied that the trustees were bound to implement decisions by the union and is contrary to the fundamental concept of the fiduciary duties of the trustees. The court held that the resolution is contrary to legislation and, as such, unenforceable.
- The trustees stand in a fiduciary capacity towards the beneficiaries and are duty-bound to exercise an independent discretion subject to the terms of the trust instrument. The trustees have no powers not given to them in the trust deed.
- The trustees furthermore have an inherent duty of independence. The duty of independence essentially obliges a trustee to bring independent judgment when participating in the decision-making process of trust administration. This means that a trustee must express his own views and opinions when engaging in trustee decision-making, which views must be free from influence, pressure or instruction from another, be it the founder, fellow trustees, the beneficiaries or any other person. A degree of influence from the founder is acceptable in circumstances where the founder’s approval is not intrinsically linked to fiduciary duties which the trustees owe to the beneficiaries, and would not in any way impact on the trustees’ ability to fulfil their duties in terms of managing and controlling the trust property.
- It is clear from the discussion above that the basis of a trust is that the trustees exercise the powers of administration and that the beneficiaries receive the enjoyment and benefit of the assets. In the scenario where a trust is a shareholder of a company, this means that the powers given to shareholders to vote on shareholders level in the company are exercised by the trustees who have a fiduciary duty to exercise these powers to the sole and exclusive benefit of the beneficiaries. The trust is the owner of the shares. The beneficiaries on the other hand are entitled to the benefits arising from the ownership, be it the declaration of dividends and, at the termination of trust, receiving the capital thereof, either in the form of shares or in the form of proceeds from the sale thereof.
- Should the views of the B-BBEE Commission be adopted, thereby permitting the beneficiaries of a trust to direct the minds and actions of the trustees, we are of the view that:
- the trustees will be unable to effectively uphold their fiduciary duties and may as a result thereof be removed as trustees and/or be held personally liable for any losses incurred by the beneficiaries/trustees;
- if challenged, decisions made by the trustees may be declared invalid, on the grounds that the trustees failed to apply an independent mind when making the decision;
- granting voting powers to beneficiaries would result in an insufficient separation of control and enjoyment of trust assets; and
- there is a risk that a court might hold that the trust is not a true trust, but rather some other legal institution such as partnership or agency.
- Accordingly, we are of the view that the beneficiaries of a trust cannot be given the authority and power to direct the manner in which the trustees vote the underlying shares held by the trust, as to do so would –
- be a direct contradiction to the very nature of trusts and the laws governing trusts; and
- defeat the purpose of the trustees’ election, which is based on a specific set of skills and/or experience the trustees have which aid them in making decisions that are fundamental to the objects of the trust.
- CONCLUDING REMARKS
- Based on the fact that it has been stated that community trusts circumvent the objectives of the B-BBEE Act, it is important to determine what these objectives are. The overarching objectives of the B-BBEE Act is stated as follows in Section 2:
- promoting economic transformation in order to enable meaningful participation of black people in the economy;
- achieving a substantial change in the racial composition of ownership and management structures and in the skilled occupations of existing and new enterprises;
- increasing the extent to which communities, workers, cooperatives and other collective enterprises own and manage existing and new enterprises and increasing their access to economic activities, infrastructure and skills training;
- increasing the extent to which black women own and manage existing and new enterprises, and increasing their access to economic activities, infrastructure and skills training;
- promoting investment programmes that lead to broad-based and meaningful participation in the economy by black people in order to achieve sustainable development and general prosperity;
- empowering rural and local communities by enabling access to economic activities, land, infrastructure, ownership and skills;
- promoting access to finance for black start-ups, small, medium and micro enterprises, co-operatives and black entrepreneurs, including those in the informal business sector; and
- increasing effective economic participation and black owned and managed enterprises, including small, medium and micro enterprises and co-operatives and enhancing their access to financial and non-financial support.
- A broad-based trust may benefit a broader base of black beneficiaries, and this is arguably more in line with the objectives of the B-BBEE Act as stated above than B-BBEE transactions involving only a few black individuals. By having a trust where the persons making the decisions, namely the trustees, must be 50% black and 25% black female and where 85% of the economic interest must be distributed yearly to black participants, it achieves both participation in management and economic interest, be it by different parties in accordance with the law and principles relating to the trust as a vehicle.
- The community trust as a BBOS was first introduced in the B-BBEE Codes during 2007 and in 2013, with effective date 2015, the B-BBEE Codes were amended to provide much stricter rules for these trusts. One of the major changes is that beneficiaries must enjoy vested rights under the trust. The B-BBEE Codes do not however require beneficiaries of Broad-Based Community Trusts to exercise the voting rights of shares owned by the trusts. In this regard, it is instructive that the B-BBEE Codes require that the participating employees in an Employee Share Ownership Programme must “manage the scheme at a level similar to the management role of shareholders in a company” and that participating employees must appoint at least 50% of the trustees. Significantly, these requirements do not apply to broad-based community trusts, which are required to have an independent chairperson, 50% independent trustees, 50% black trustees and 25% black female trustees. This should be interpreted as a deliberate policy decision on the part of the Minister of Trade and Industry when he amended the B-BBEE Codes in 2015.
- Furthermore, the B-BBEE Codes do not require that the beneficiaries of a broad-based community trust must become the “unencumbered owners of the shares” owned by the trust. The B-BBEE Codes simply require that, on winding‑up or termination of the trust, all “accumulated economic interest” must be transferred to the beneficiaries or an entity with similar objectives.
- The B-BBEE Codes also do not have any requirements in respect of who the classes of beneficiaries may be and there is specifically no exclusion of minors from the ambit of who may benefit. It is arguable that to truly achieve the long-term objectives of the B-BBEE Act, the focus should be placed on empowering young black participants to hone their skills and thereby enable them to become business leaders of the future. It is also trite law that, although a minor is regarded as not having the legal capacity to act on their own, he or she may act in the legal sphere if assisted by a parent or guardian. The B-BBEE Commission’s argument, that minors are completely incapable of exercising their rights, is therefore unfounded and bad in law.
- We submit that a community trust meets the criteria as laid down by the B-BBEE Codes and that if the B-BBEE Commission’s opinion is correct that this type of broad-based community ownership trusts circumvents the objectives of the Act, then its recourse is to amend the law. Although the B-BBEE Act provides the power to the B-BBEE Commission to issue non-binding opinions on the interpretation of the B-BBEE Act, the B-BBEE Commission cannot apply an interpretation to the B-BBEE Act and the B-BBEE Codes which is broader and inconsistent with the actual wording as promulgated. Allowing this would cause severe legal uncertainty and would in effect elevate the B-BBEE Commission to the status of the Legislature, which was never the intention.
- It is our respectful view that the trustees, as legal owners of the shares in the measured entity, are entitled to exercise the powers of a normal shareholder in the company and that meets the control requirement. The trust also provides for vested rights of the beneficiaries, as the trustees are obliged in terms of the trust deed to invest the income of the trust annually in the beneficiaries who have been selected from a specified class of natural persons and, upon termination of the trust, the trustees are obliged to pay the capital of the trust to beneficiaries who meet the qualifying criteria. Through the payment of income and capital to the natural persons who fall within the specified class, the selected beneficiaries are empowered to become participants in the economy, thereby meeting the B-BBEE Codes.
For assistance with any aspect of your Broad-Based Black Economic Empowerment Trust structure, feel free to contact our experienced team of lawyers to assist you in taking the right actions at the right time to protect you.
LLB; LLM (Import/Export Law)
Corporate and Commercial Law
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Fiduciary and Commercial Department
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 Cora Hoexter, Administrative Law in South Africa (2007) at 116-7.
 Estate Watkins-Pitchford v Commissioner for Inland Revenue 1955 3 All SA 57 (A); Erasmus et al “Trusts” 529.
 Crookes v Watson 1956 (1) SA 277 (A).
 This decision has been severely criticised and references to some of the commentary can be found in Olivier, Strydom and Van den Berg Trust Law and Practice 1-22 fn98.
 Braun v Blann and Botha 1984 2 SA 850 (A).
 Trust Property Control Act 57 of 1988.
 Olivier, Strydom and Van den Berg Trust Law and Practice 2-5.
 Olivier, Strydom and Van den Berg Trust Law and Practice 3-35.
 Lupacchini NO and Another v Minister of Safety and Security (case number 16/2010) , ZASCA 108 (17 September 2010)
 Cameron, De Waal & Solomon Honoré’s South African Law of Trusts Juta 2018.
 Land and Agricultural Bank of South Africa v Parker and Others 2005 (2) SA 77 (SCA)