What constitutes ownership for ICASA licences - option work

This is interesting.  There are draft regulations that state that individual licensees need to be a level 4 and have 30% ownership. I was contacted by Sakeliga who have told me that they are preparing litigation against these regulations.  This works for me.  We've seen the issue with Starlink in South Africa.  ICASA (read the government) would rather prevent people in the farflung  reaches of South Africa from accessing a fast and reliable network because they insist on a ridiculous ownership requirement.  It's the undoing of this government.  If you want to support the litigation then make contact Tian Alberts at Sakeliga.

However litigation takes a while and compliance may be the interim solution. 

The draft regulations were published in March 2021.  The regulations remain in draft format but in our experience the final gazetted regulations often look very similar to the draft.

There are two absolute requirements for individual licenses that need to be achieved between 36 and 48 months depending on the license or size of the applicant.  The licensee needs to be a level 4 with 30% equity held by black people.  The truth is that no company can achieve a level 4 unless they have a portion of black ownership.   If this requirement needs to take effect in the future then it’s best to comply with the 30% at the outset and work on the BEE levels over time.

What is black equity?
The definition states that each Individual Licensee must have a minimum of 30% of its ownership equity held by Black People.  Equity is further defined as the instrument by which a person holds rights of ownership in an entity.   Regulation 4(1) states that this equity must be derived through the Flow-Through Principle

The regulations are clear that any instrument of ownership will constitute ownership if verified by an accredited verification agency.  The ICT BEE codes consider a wide range of instruments - trusts, private equity, non-profit companies. warrants and options.  Most equity instruments will trigger a tax event and are quite dependent on the black shareholder meeting their repayment plans if they are indebted. 

Options are a compelling method of ownership compliance because if the option holder behaves as a shareholder whilst holding the option then the ownership is deemed to exist.  There is no Capital Gains Tax (CGT) until the option matures and most importantly the option holder is able to amass the necessary capital to purchase the shares through dividends that flow at the outset.
If you are looking at an ownership structure to comply with the ICASA regulations and would like to look at options please contact us and we’d happily set up a consultation with you at no charge.

If you would like to know more about this email or learn about our comprehensive solution, please contact us on [email protected]

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