On the 31st of May 2019 certain amendments were made to the Amended Codes of Good Practice. For the first time since the inception of the B-BBEE Codes of Good Practice, clarity was provided on how to verify unincorporated joint ventures (JV). This is a welcome inclusion in the Codes.
In terms of paragraph 7 of Code Series 000, Statement 000 unincorporated JV’s are required to compile a consolidated verification certificate. In order for a verification agency to issue a consolidated verification certificate, all entities within the unincorporated JV must have their own valid B-BBEE certificate or affidavit (whichever is applicable).
The consolidation of compliance data shall be based on weighting in accordance with the JV agreement relevant to the specific JV. Should two companies, for example, enter into an unincorporated JV, their respective scores in terms of the relevant Code of Good Practice will be weighted according to their proportionate share in the JV and added together for a combined score out of 100.
Example: If company A and B form an unincorporated JV their consolidated score will be calculated as follows:
| Company A | Company B | |
| Share in JV: | 70% | 30% |
| Score on B-BBEE Scorecard: | 60 (LEVEL 8) | 100 (LEVEL 1) |
| Contribution in terms of a proportionate share in JV: | 42 (60 x 70%) | 30 (100 x 30%) |
Combined Score for unincorporated JV = 72 (42 + 30) LEVEL 6.
The following principles will also apply:
- Where any of the entities within the JV qualify for an automatic Level 2 B-BBEE status due to them having at least 51% Black Ownership a score of 95 points must be used in the above calculation.
- Where any of the entities within the JV qualify for an automatic Level 1 B-BBEE status due to them having 100% Black Ownership a score of 100 points must be used in the above calculation.
- Exempted Micro Enterprises with less than 51% Black Ownership must use a score of 85 points in the above calculation.
- Notwithstanding the B-BBEE status level attributed to the unincorporated JV in terms of the above-mentioned mechanism, the black ownership of the respective partners may be flowed through to the JV in proportion to the respective JV partners’ economic interest and voting rights in the JV as determined by the JV agreement.
- A JV certificate is only valid for 12 months and only applicable to a specific project.
Kindly contact your SEESA B-BBEE Legal Advisor for more information or assistance with the above.
ABOUT THE AUTHOR:
Bernard du Preez is an admitted attorney who completed his B.Com (Law) and LLB degrees at the University of the Free State. Bernard started at SEESA as a B-BBEE legal advisor and currently holds the position of Provincial BEE Manager at our Cape Town branch.