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Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Industry Charters

Financial Services  Charter

Code Series FS100: Measurement of the Ownership Element of Broad-Based Black Economic Empowerment

Interpretation Note on Code FS100, Statement 100

2. Illustrative example


The following is an illustrative example:

BEE (Pty) Ltd purchases 10 ordinary shares in Bank A for R100 on 30 June 2005.

The total number of ordinary shares in issue of Company A as at that date is 120.

i.e. the value of Bank A at R10 per share on 30 June 2005 is R1,200

All ordinary shares rank equally in terms of economic flows and voting rights
The purchase price is paid for as follows:
§ BEE (Pty) Ltd contributes R10 from its own reserves
§ Bank A subscribes for Preference shares in BEE (Pty) Ltd to the value of R90, i.e. BEE (Pty) Ltd provides R10 own contribution and secures financing of R90 to fund the purchase of 10 shares in Bank A for R100
Bank A is a local multinational but it has been reasonably estimated that 90% of Bank A's operations are South African; and;
Eight of Bank A's shares are held by Public Entities and Bank A has no Mandated Investments
The baseline number of shares to be used in calculating the percentage of Company A held by BEE (Pty) Ltd on the transaction date is as follows:
§ Total shares in issue = 120 (less) 8 shares held by public entities (less) 10% of 120 shares (12 shares) for foreign operations
§ Baseline number of shares = (120 - 8 - 12) = 100
Therefore percentage held by BEE (Pty) Ltd at inception = 10 / 100 = 10%
The shareholders of BEE (Pty) Ltd is comprised as follows:
§ 50 shares held by black men (25 of the 50 are held via an Employee Trust).

Therefore, black men have an effective interest of 5% in Company A; and

§ A Broad-Based BEE Scheme holds 2.5% effective economic interest in Company A
§ 50 shares are held by Black Women who are all defined as new entrants.

Therefore, Black Women hold an effective interest of 5% in Co. A; and

§ New entrants hold a 5% effective interest in Co. A