BEE Ownership Deal Analysis Checklist

Documents to review: Shareholders Agreement Sale of Share/Subscription Agreement Loan Agreement (if there is one) Preference Share agreement (if there is one) The Trust Deed if a trust is involved in the transaction Any other document relating to the voting right and/or economic interest of shareholders Aspects of a Shareholders Agreement one should pay attention to: Number of shares that black shareholders are entitled Number of rights attached to the shares The Black Voting Right is calculated as follows: (Number of shares that black shareholders are entitled X Number of rights attached to the shares) (Total number of issued shares X number of rights attached to those shares) There might be different rights attached to different class of shares, in that case the Black Voting Right is calculated as follows: Σ(No. of shares that black shareholders are entitled in classi X No. of rights attached to the shares) Σ(Total no. of issued shares in classi X number of rights attached to those shares) where i = the different classes of shares Dividend policies i. Are all shares treated equally in terms of the distribution of dividends? If not so, what proportion of the economic distributions will the black shareholders share? ii. Are the black shareholders restricted from receiving their portion of the dividend until certain conditions have been fulfilled? If so what proportion of the dividend are they entitled to receive now? Economic Interest is calculated as follows: Amount of Dividends that black shareholders are allowed to receive Total Economic Interest Distributed to all shareholders Review the entire document to see if there are other restrictions to the black shareholder in either receiving economic benefit or exercising their voting rights Aspects of a Sale of Share/Subscription Agreement one should pay attention to: Does the seller of the shares have some rights over the sold shares after the transaction? Or are they able to repurchase the shares at a lower rate under certain conditions? Number of shares subscribed by the black shareholder. The loan and financing details might be included in this agreement, if it is included please check for the pointers under the loan and preference share agreements. Aspects of a Loan Agreement one should pay attention to: The amount of money that the black shareholder has borrowed to buy the equity Does the loan agreement restrict the shareholder’s entitlement to economic benefits or exercising their voting rights? If so by what extend? Black Voting righting right calculation must therefore be adjusted as follows: Total unrestricted voting rights exercisable by black shareholders (Total number of issued shares X number of rights attached to those shares) Black Economic Benefit calculation must also be adjusted as follows: Total economic interest black shareholders are entitled – Total encumbered black economic interest Total Economic Interest Distributed to all shareholders Aspects of a Preference Share Agreement one should pay attention to: Does the preference share have voting rights? If so how much would it dilute the ordinary share voting rights? If the preference share is issued as a financing instrument for the BEE shareholder to purchase the equity stake, then this should be accounted for as a loan to the BEE shareholder. Aspects of a Trust Deed one should pay attention to: Are the % black beneficiaries of the trust clearly defined? Are the methods of distribution of economic benefits clearly stated? Are there any ways that the black beneficiaries will not receive their respective proportion of the economic benefits of the trust? Will the beneficiaries of the trust receive economic benefit during the life of the trust? If not, Will the beneficiaries be entitled to receive their respective proportion of the trust asset upon liquidation of the trust? The above conditions must be met in order for a trust to be included in the black ownership calculation. Use voting right or economic interest in ownership calculations: Always use the lower of the two in the calculations.