The Leniency Programme It is not a “get out of jail free” card

The Leniency Programme instituted by the B-BBEE Commission is

not a ‘get out of jail free’ card. In contrast, it is a platform designed to

incentivise organisations to take the initiative to approach the B-BBEE

Commission, whereby they acknowledge having participated in an

Ownership Fronting Practice before 24th October 2014, in exchange

for prosecution immunity. Notably, the Leniency Programme does

not provide immunity from an investigation and does not apply

to multinationals participating in an Equity Equivalent Investment

Programme.

The B-BBEE Commission views the programme as a compliance

mechanism. The purpose of its design was to encourage the reporting

of all major B-BBEE transactions before the promulgation of the

amended B-BBEE Act (The Act), promoting adherence to the same.

Section 13F(3)(b)(ii) of The Act permits the B-BBEE Commission to

issue non-binding advisory opinions on any provision held within, to any

person seeking advice on an initiative or structure prescribed in The

Codes of Good Practice.

To grasp the rationale behind The Leniency Programme and its

benefit to all parties, one has to recall a time before establishing the

B-BBEE Commission, including the transactional nature of B-BBEE

implementation used by organisations. In many cases, before 2014,

organisations benefitted from unwarranted Ownership recognition

points. Due to a lack of oversight, many such Ownership deals fell

through the cracks of compliance, although the transaction’s reality

fell short of meeting the requirements prescribed in the The Act.

In some cases, organisations continued trading under such

Ownership structures.

Giving organisations the benefit of the doubt, perhaps the situation

would have been different if the B-BBEE Commission had been formed

earlier, considering it provides an avenue to request an opinion. In

hindsight, organisations might have made more informed decisions at

the time.

Upon its establishment, the B-BBEE Commission entered an

undisciplined and unmonitored environment. Accordingly, their first

port of call was to monitor the fairness and transparency of Ownership

transactions. Therefore, as of 24th October 2014, all major Ownership

transactions to the value of more than R25m had to be submitted to

the B-BBEE Commission to be checked for their compliance with the

Codes and The Act, hence establish validity.

The Minister determined the financial threshold for submission to the

B-BBEE Commission through Notice No. 551 in Government

Gazette #40898. The mammoth task set before the B-BBEE

Commission meant it was not practical to test the compliance of all

transactions that took place before 24th October 2014. Hence, the

Leniency Programme’s objective is to collectively align Ownership

transactions with The Act to ensure real and meaningful Ownership

is in place.

However, the term “granting immunity” does not mean that the B-BBEE

Commission will not initiate an investigation into misaligned transactions.

Furthermore, the victims of such transactions will be able to lodge a

complaint with the B-BBEE Commission in line with section 13F(1)(c)

and (d) of the The Act, read together with regulation 15 held within the

B-BBEE Regulations.

Notwithstanding, the B-BBEE Commission does not condone any state

procurement or economic activity won due to unwarranted Ownership

transactions.

The Leniency Programme may afford immunity from prosecution, as

there was no requirement to challenge the compliance of Ownership

transactions before the prescribed date. Therefore, those party to

an unwarranted Ownership transaction before the prescribed date

may voluntarily report it to the B-BBEE Commission in exchange for

immunity.

Major B-BBEE Transactions

after 24th October 2014

All Major B-BBEE Transactions entered into after the prescribed

date, with a transactional value of more than R25m, must have the

compliance challenged by the B-BBEE Commission. The R25m

excludes administration, professional and legal fees. Statement 102

clarifies that a transaction’s value is determined by the sale of an asset,

business or equity instrument.

Immunity

The B-BBEE Commission will provide the party reporting the B-BBEE

Ownership transaction with written immunity from prosecution. The

exemption granted is only limited to the reported Ownership transaction.

It does not extend to other scorecard elements as per the applicable Code or other unrelated

Ownership transactions unless the transaction was reported independently of the one already

under investigation.

Revoking immunity

Contravening conditions of immunity will result in withdrawal; hence the investigation and

prosecution will continue as per the prescribed procedure. The B-BBEE Commission may

withdraw immunity, irrespective of it being absolute or conditional, if there was:

> Any engagement in Fronting Practice outside the reported transaction;

> Failure to implement the directive of the B-BBEE Commission regarding remedial action

of the Ownership transaction; and

> Failure to disclose information that would have been material to a resolution of the

investigation.

Requirements and rules for receiving immunity

A party reporting a misaligned Ownership transaction will only qualify for immunity if it:

> Is the first person to report the misaligned Ownership transaction to the B-BBEE

Commission voluntarily;

> Comprehensively discloses information on the reported B-BBEE Ownership transaction;

> Acts in good faith and shows cooperation in the manner in which it interacts with the

B-BBEE Commission;

> Has not concealed any material information relating to the Ownership transaction under

investigation;

> Acts under the directive of the B-BBEE Commission post-assessment of the reported

Ownership transaction; and

> Does not raise confidentiality claims to restrict the B-BBEE Commission from accessing

relevant and material information relating to the transaction under investigation.

However, the confidentiality rules of information prescribed in the The Act

apply to any information submitted through the Leniency Programme.

Falling outside the ambit of The Leniency Programme

Areas where an Ownership transaction does not qualify for the Leniency Programme include:

> Ownership transactions that are already subject to investigation in terms of section 13J(1)

of the The Act, read with regulation 15 of the B-BBEE Regulations;

> Where the B-BBEE Commission issued an advisory opinion to an organisation that

subsequently disregarded such advice;

> Matters referred to the B-BBEE Commission for investigation by other regulatory

institutions such as, but not limited to, the South African Revenue Services, Competition

Commission, Companies and Intellectual Property Commission, and South African

National Accreditation System;

> The Ownership transaction involves people already under investigation in section 13J(1) of

The Act read with regulation 15 of the B-BBEE Regulations; and

> Multinational organisations participating in an Equity Equivalent Investment Programme.