Recent statements by the commissioner of the Broad-Based Black Economic Empowerment (B-BBEE) Commission, Zodwa Ntuli, have resulted in much media attention and commentary on the use of broad-based trusts in B-BBEE ownership structures. The commissioner stated that the “vast majority” of transactions involving such trusts are not compliant with the law and do not constitute genuine and effective black ownership. She also stated that the beneficiaries of a broad-based trust must be clearly identifiable and able to exercise voting rights; must receive the same economic benefits as other shareholders; and ultimately become the unencumbered owners of the shares in which they are invested. The codes of good practice issued in terms of the B-BBEE Act sets out the basis on which the B-BBEE ownership of a firm is measured. The codes clearly permit the use of broad-based trusts. The use of such trusts by companies is, in fact, incentivised in that an additional three B-BBEE ownership points m...

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