Results 1 to 4 of 4

Thread: Black Ownership

  1. #1
    Junior Member
    Join Date
    Dec 2008
    Location
    Cape Town
    Posts
    24
    Thanks
    1
    Thanked 2 Times in 2 Posts

    Black Ownership

    Hi all, i am faced with a dilemma in that to grow my business to the next level i need to have black ownership. Currently we are level 4 EME but we are being forced to have have black ownership by many large non government companies.

    I dont have a problem with that if we can have that person adding value to the business and then this brings along the growth that helps take us to the next level. The problem i have is i dont have anyone within the organisation who i could even ear mark for that position. Someone outside exposes us to a huge risk. I am not rubbing shoulders with anyone who might be able to come on board who i can trust and fills a requirement.
    So i thought of a new employee of colour in a middle management position who we can give a share holding to, which he will have to work off the debt of that share holding and at the same time he can grow to become decision maker in the business over time.

    My question is would that be legal and solve my ownership problem and if so how would be best to structure that deal in either a CC or we convert to a (Pty) Ltd.

    Thanks

  2. #2
    Silver Member Greig Whitton's Avatar
    Join Date
    Mar 2014
    Location
    Cape Town
    Posts
    316
    Thanks
    32
    Thanked 99 Times in 81 Posts
    Quote Originally Posted by Duncan View Post
    My question is would that be legal and solve my ownership problem
    There's nothing illegal about selling an equity share to a manager and structuring the sale as a loan agreement that the new partner settles over time. However, it is only going to solve your "ownership problem" if the equity share is fairly substantial. To earn maximum ownership points on the new B-BBEE scorecard (which becomes mandatory from May), you would need at least 25% black ownership (EMEs can automatically qualify for level 2 B-BBEE status, but then the black ownership portion would need to be at least 51%). Selling a quarter (or more) of your business to a middle manager is fraught with risk, and bear in mind that employee share programs are subject to multiple criteria.

    If a black partner is absolutely non-negotiable, you could also consider a joint equity exchange: approach a black-owned business client / supplier / industry partner / etc. and offer them a stake in your business in exchange for a stake in theirs. Obviously it's not without risks and complications, but at least you know that you are getting something immediate and substantial in exchange while broadening your investment portfolio.

    Founder of Evergrow - Helping South African business owners grow their business without the growing pains

  3. #3
    Diamond Member wynn's Avatar
    Join Date
    Oct 2006
    Location
    east london
    Posts
    3,338
    Thanks
    548
    Thanked 624 Times in 523 Posts
    The option I would explore is to create a BBBEE trust of which you are the trustee and in which every black member of staff is a beneficiary as long as they are on the staff, the minute they resign or are fired they fall out of the trust.
    The trust will hold the necessary shares in the business and share of the dividends earned by the trust is according to pre arranged beneficiary points (length of service, position in the company etc.)

    That way you still get to call the shots and you wont be stuck with a partner you may not want.
    "Nobody who has succeeded has not failed along the way"
    Arianna Huffington

    Read the first 10% of my books "Didymus" and "The BEAST of BIKO BRIDGE" for free
    You can also read and download 100% free my short stories "A Real Surprise" and "Pieces of Eight" at
    http://www.smashwords.com/books/view/332256

  4. #4
    Junior Member
    Join Date
    Dec 2008
    Location
    Cape Town
    Posts
    24
    Thanks
    1
    Thanked 2 Times in 2 Posts
    Hi all, just to say thanks for your help and advice in this regards. Finally settle on the BBEEE trust and its in the process of being drawn up and finalised.

Similar Threads

  1. Replies: 4
    Last Post: 14-May-12, 11:41 AM
  2. Notify SARS for change in ownership
    By eitai2001 in forum Tax Forum
    Replies: 3
    Last Post: 20-Apr-12, 02:12 PM
  3. [Question] How to work with the stress of business ownership
    By Singhms in forum General Business Forum
    Replies: 11
    Last Post: 15-Oct-11, 01:01 AM
  4. Land ownership restrictions?
    By garthu in forum South African Politics Forum
    Replies: 10
    Last Post: 20-Mar-11, 09:31 AM
  5. [Question] Ownership percentage with foreign partner
    By qophelo in forum General Business Forum
    Replies: 1
    Last Post: 07-Feb-11, 04:41 PM

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •