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  • Writer's pictureMy Finance Partner

BBBEE and Trust Ownership Structures

Updated: Oct 18, 2022

There has been an increasing trend with companies to use trusts as part of their BBBEE ownership structures.


A level of abuse has started to creep in with regards the use of trusts and the BBBEE Commission is therefore looking carefully, and generally unfavourably, at their use especially the use of discretionary trusts.

While not all discretionary trusts are problems the main concern for the Commission is whether the beneficiaries can be specially identified and will receive benefit or will this change repeatedly. What the Commission looks at includes:

  • Are there criteria to being beneficiaries that can mean someone can be a beneficiary and then removed? Beneficiaries defined as being ‘employees’ is potentially not as strong as being defined as ‘black female employees’.

  • Are the beneficiaries even aware they are beneficiaries? If black disabled women are the beneficiaries how many know that? And if they don’t know that they are beneficiaries how can they exercise any rights or receive any benefit?

  • Are the beneficiaries entitled to anything? Or does it require trustee support? If beneficiaries can’t act without trustee support and trustees can act without beneficiary support who has the deed empowered?

  • If the trust is set up to fund education for black people, then what is the entitlement of a black person who receives a bursary this year but doesn’t next year? What ownership or voting rights do they have?

In order to understand the Commissioner’s position, one should contrast the beneficiaries of discretionary trusts to company shareholders who, once a shareholder cannot have their shares taken from them without their consent, death or insolvency. Their shareholding is recorded in register with their name and address (that they chose) and they have rights in terms of the Companies Act and the company’s MOI whether the directors agree or not. This is clearly not the case in discretionary trusts, hence why they can prove problematic in proving BBBEE ownership.


Do Trusts still have a role to play in BBBEE?

Yes. In theory a discretionary trust can still work and they are still allowed by the act. However, there are other types of trusts besides discretionary trusts, such as bewind and business trusts, which may be far more suitable.

Regardless of the chosen trust, it is imperative to have clearly named and identified parties to the trust to ensure the stated objective of the trust is achieved. It is therefore imperative to ensure your trust deed is correctly drafted failing which there could be costly, unintended consequences.


Contact us at My Finance Partner for a complementary consultation to discuss your BBBEE challenges and the structuring available to you. info@mfpartner.co.za

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