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THE

BEECHAMBER

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NEWS

OWNERSHIP OF AN ENTERPRISE DEVELOPMENT BENEFICIARY



LMN Enterprises is an Enterprise Development Beneficiary of ABC Traders who holds 51% ownership in it. ABC Traders' Enterprise Development contributions towards LMN Enterprises are in line with the criteria in series 400. The Amended General B-BBEE Codes of Good Practice do not expressly state whether a Beneficiary may or may not be ‘controlled’ by the measured entity. The only reference that might have any bearing on the above is Statement 000, Par 2.2, which states: "In interpreting the provisions of the Codes of Good Practice, any reasonable interpretation consistent with the objectives of the B-BBEE Act as amended and the B-BBEE Strategy must take precedence.” The Amended General B-BBEE Codes of Good Practice, however, do refer to the Companies Act, Paragraph 3 (subsidiary relationships), which states the following: “A company is a subsidiary of another juristic person if that juristic person is directly or indirectly able to exercise or control the exercise of a majority of the general Voting Rights.” The Amended General B-BBEE Codes of Good Practice define ‘enterprise development contributions’ and ‘supplier development contributions’ in Schedule 1.


As a majority shareholder in LMN Enterprises, can ABC Traders claim its contribution to them as Enterprise Development spend?


As ABC Traders has the majority ownership in LMN Enterprises, contributions made by ABC Traders do not constitute Enterprise Development spend as the objective of the Enterprise Development cannot be fully met since there is no operational independence. This is because the ABC Traders has significant economic connections to the beneficiary entity.


Enterprise & Supplier Development Services are available to assist Members with insight into Enterprise Development Contributions.

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