The B-BBEE codes of Good Practice allows for several principles under the ownership element which could assist a company to amplify its ownership score or to achieve a higher ownership percentages. One such principle is the Modified Flow Through Principle.
The Modified Flow Through Principle states that where in a chain of ownership, Black People have a flow through level of participation of at least 51%, then only once in the entire ownership structure of the measured entity, such participation may be treated as if it were 100% Black. This may only be applied to Voting Rights and Economic Interest which are 1.1.1 and 1.2.1 on the ownership scorecard and therefore does not apply to any of the other indicators.
From the above example it shows that a company could achieve a 51% Black Owned Company by selling in effect 26.01% shareholding. This could give an entity a competitive advantage in its industry as there are additional points that can be achieved from procuring from a 51% Black Owned Company under procurement.
The way in which such a deal is structured is vitally important. Call Thrive for a consult to understand the above principle in more detail.
Thrive Corporate Advisors is a Broad-Based Black Economic Empowerment (“B-BBEE”) consulting and advisory firm which assists the corporate sector with all aspects of B-BBEE legislation.