BBBEE Fronting Definition.....

The President signed the B-BBEE Amendment Act (the Act) 46 of 2013 into law on the 27 January 2014. The Proclamation Notice was signed on the 2nd October 2014 and it was gazetted and came into effect on Friday 24 October 2014.
 
The target date for setting up the new BEE Commission and B-BBEE Verification Regulator is 31 March 2015.

The Trumping Clause (Section 3) has been deferred for 12 months, and will come into force in October 2015.

The B-BBEE Amendment Act is now real and in force. I have started consulting and training companies on the increased risks that its provisions introduce with regards to Fronting.

FRONTING

Fronting is defined as a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this Act or the implementation of any of the provisions of this Act.

A person commits an offence if they knowingly:

i. Misrepresent or attempt to misrepresent the B-BBEE status of an enterprise.

ii. Provides false information or misrepresents information:-
·    To a B-BBEE Verification Professional to secure a BEE status or any benefit from compliance with the Act.
·    To a public entity or organ of state regarding a B-BBEE status.
iii. Engages in a fronting practice.

Penalties associated with Fronting are heavy:-

·         A person:  A fine &/or imprisonment of up to 10 years.
·         Legal Entity: A fine of up to 10% of annual turnover.
·         Directors and Shareholders may be imprisoned or fined

Government agencies may cancel contracts awarded on false B-BBEE information and offenders will be unable to do business with the Government for 10 years.

For Expert advice on the outgoing and incoming B-BBEE codes and Act, contact Nelson Sebati.