B-BBEE affidavits as B-BBEE certificates
With the issuance of the revised B-BBEE codes in 2013, affidavits became a way for smaller companies to obtain B-BBEE certification by confirming information in front of a commissioner of oaths. This opened the door for companies to automatically comply without having to go through an audit, provided they have sufficient black ownership. Legally, this means that a company with black ownership, the qualifying percentage dependent on the sector the company operates in, can obtain a B-BBEE certificate without having an independent, accredited rating agency verify the qualifying information.
The aim of the automatic qualification, as per the revised codes, was to exempt smaller companies with black ownership from an expense to achieve a B-BBEE level. It is important to note that there are certain minimum requirements that a company needs to adhere to, to legally complete the affidavit as a form of certification. These requirements are often misinterpreted and wrongfully applied.
The summarized requirements of completing an affidavit as a B-BBEE certificate
Adhering to the ownership requirement:
The shares being held by a black participant must contain the rights pertaining to ownership in addition to value having been created in the hands of black people. This means that the percentage of black ownership specified must be equal to the voting rights and economic interest carried by the black shareholder. Furthermore, the company must receive full marks on the nett value calculation, which means that the shares must have been paid for to a certain stage depending on the inception date of the transaction. Value must have been created in the hands of the black participant.
Total revenue threshold:
Before a company can complete an affidavit, it must be determined whether the income of the company falls within the necessary minimum, depending on the sector-specific thresholds. Total income can be defined as income generated from its operations using the generally accepted accounting standards in South Africa. The total income does not have to be specified on the affidavit, but it should be stated that it falls within the ambit.
Accuracy and completion of information:
The deponent of the affidavit must be a representative of the company, duly authorised. The designation that person possesses must be stated clearly with identification. Identification details of the business must also be disclosed with the nature of the business. The nature of business should be inserted with caution as the incorrect description could lead to the company residing under a different sector code than what template it is completed on. As mentioned, different sectors have different requirements for completing an affidavit, and certain sectors do not allow for affidavits to be completed as a form of certification. The company should then confirm on which year the income was determined to qualify for completing the affidavit. It must be stated that an affidavit cannot be completed on figures older than twelve months; it must always be the latest annual figures used on the affidavit.
Commissioner of oaths:
Normal procedure should apply when the deponent signs in front of the commissioner, where the date, designation, identification, and address are evident. The signature of both parties should be dated for the same date and done after the financial year, as mentioned above, has concluded. The commissioner should preferably also be in an independent relationship toward the company. A consultant of the company, that commissions the affidavit, can be seen as having a conflict of interest.
Conclusion
As there are various requirements that need to be adhered to, one must be attentive when completing and also reviewing a B-BBEE affidavit. Wrongful completion will mean the affidavit cannot be eligible to qualify as a B-BBEE certificate and misrepresentation is a criminal offense defined as fronting.