Why should I look into a B-BBEE trust as an ownership option?
One of the reasons for the introduction of BEE in South Africa was to promote inclusive economic growth. One of the key elements of BEE is ownership, which requires businesses to have a certain percentage of their ownership held by black people. Using a trust for B-BBEE ownership can offer several benefits in terms of South African law.
Enhanced BEE Rating
One of the primary benefits of using a trust for BEE ownership is that it an effective way to improve your company’s BEE score. A trust can be used to hold shares on behalf of black beneficiaries, who can then be considered as black shareholders for BEE purposes. This can help businesses achieve higher levels of compliance under the BEE ownership requirements and boost their overall scorecard rating.
Long-Term Ownership Stability
A trust can provide a stable and long-term solution for BEE ownership. The trustees of the trust can manage the shares on behalf of the beneficiaries, ensuring that the shares remain in black ownership over time. This can provide more certainty and stability for businesses, as they can be assured that they are meeting their BEE ownership obligations over the long term.
Protection Against Dilution
Another benefit of using a trust for BEE ownership is that it can offer protection against dilution. Shares held in a trust are protected from being sold or transferred without the approval of the trustees, ensuring that the black beneficiaries' ownership stake is not diluted over time. This can help to safeguard the interests of the beneficiaries and ensure that their ownership stake remains intact.
Flexibility In Structuring
A trust can provide flexibility in structuring BEE shareholding. The trust deed can be tailored to meet the specific needs of the business, allowing for different classes of beneficiaries or different vesting arrangements. This can enable businesses to structure their BEE ownership in a way that best suits their needs and circumstances within the requirements of the BEE Codes and legislation.
Using a trust for BEE ownership can also offer tax benefits. Dividends paid to the beneficiaries of the trust are exempt from dividends tax.
In conclusion, using a trust for BEE ownership can offer several benefits for businesses looking at BEE ownership options. Trusts can help businesses achieve a higher BEE score, provide long-term ownership stability, protect against dilution, offer flexibility in structuring, and provide tax benefits.
We can assist with advice and structuring BEE ownership options. Please contact our offices for more information.