The B-BBEE Commission released a media statement on 7 August 2017 regarding fronting and non-compliance, having also attached a list of entities which will be investigated.
In summary, the B-BBEE Commission has launched investigations of possible violation of the B-BBEE Act by specific agencies in the field. The investigation relates to B-BBEE ownership structures as well as non-compliance with the Codes of Good Practice within the verification process. All identified entities under investigation, have been notified and if adverse findings are made against them, they will have 30 days to respond to the findings before the B-BBEE Commission makes their findings final.
If found to have violated the B-BBEE Act, entities may be prosecuted and exposed to a fine of 10% of the entity's annual turnover, whilst the individuals involved may be fined or imprisoned for up to 10 years. Furthermore, the entities may be excluded from practising business with the government for a period of up to 10 years. Any contracts they have with any state owned or government departments may also be cancelled.
However, it has been stated that the B-BBEE Commission will in terms of the B-BBEE Act, consider alternative dispute resolutions, as and when deemed appropriate, and such outcomes will be communicated and published as is required in the B-BBEE Act.
For more information on "Fronting Indicators" please read the following: Guidelines on Complex Structures & Transactions, and Fronting (Previously Statement 002) and feel free to contact us for any questions.