# Regulatory Compliance Category > BEE and Employment Equity Forum >  The laws surrounding BEE?

## Jolandi

Can anyone tell me what is the laws sarounding converting a bussiness to BEE.
I am completely clueless about this. Our company is conciddering converting to BEE but aparently you must give up 49-51% of the company shares before you can do that.

!!HELP!!

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## Dave A

Not necessarily. The first clue I need is the annual turnover of the business and the industry sector. This helps me know which BEE codes of good practice apply.

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## duncan drennan

If you really want to look at the laws, a good place to start is the DTI's section on BEE, but there are some very clued up people around here who I'm sure would be willing to point you in the right direction.

You don't "convert" to BEE, it is just a measure of how closely you fulfil the suggestions laid out in the BEE codes of good conduct.

The most important thing is to figure out which codes you have to comply to. There are basically three categories that you could fall into, exempt, qualifying small enterprise (QSE), and normal. It is based largely on your turnover.

Turnover:
Less then R5mil : micro enterprise - exempt (automatic level 4)
R5mil - R35mil : QSE - use small enterprise scorecard (choose 4 of 7 evaluation points)
Greater then R5mil: Other companies - use generic scorecard

This overview of the BEE codes is quite useful.

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## Jolandi

Thanks, and thanks for the correction (even tough it just makes me realise even more that I have no clue!!!)

Thax for the link, i wiil defenitly have to use it.

Just by the way..... how do you know so much about everything?

Its like biology...,you learn more and more about less and less untill you know everything about nothing
Thax a lot
N-joy
Jo

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## Dave A

"Everything" would be taking things way to far.

Speaking for myself, for what little I do know - it's experience I guess. And a lot of that was learning from doing stuff wrong the first time round. Or the second.

All I know is that I wish there was an internet and forums such as these when I started out. I'm sure it would have saved a lot of pain along the way.

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## Jolandi

Duncan
You sound like you might also be a little crazy?
I hope you are.........

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## duncan drennan

> You sound like you might also be a little crazy?
> I hope you are.........


Hehehe  :Crazy:

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## Jolandi

Duncan

Yip, thats what i said......
I like "crazy" a hell of a lot more than "normal".
hee hee

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## Synergy

Hi Yolanda 

BEE is ONLY applicable to companies that require your status, If you deal with smaller companies or customers that does not require you to be BEE Compliant, you can still trade BUT if you intend growing then consider BEE, This is a way to evolve. What business are you. kindly visit our site: www.synergyma.co.za

Marten

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## Moneymaker

> Hi Yolanda 
> 
> BEE is ONLY applicable to companies that require your status, If you deal with smaller companies or customers that does not require you to be BEE Compliant, you can still trade BUT if you intend growing then consider BEE, This is a way to evolve. What business are you. kindly visit our site: www.synergyma.co.za
> 
> Marten


I wrote a number of books that were published in SA and developed a boardgame which one of our erstwhile education facilities wanted to acquire. They placed their order with me and the order went through to procurement who then demanded I fill out thier BEE documentation containing numerous pages. I simply wrote across these pages "NOT BEE COMPLIANT" and faxed it back.

Two weeks later the desperate head of department was asking me where the materials were as they were needed for the curriculum. Needless to say I had the procurement fellow on the phone telling me that they would _cancel their order and get the stuff from someone else if I didn't comply_.....

I took great pleasure in inviting him to find someone brave enough to reproduce my work and in doing so violate my copyright!!   :Big Grin:  :Big Grin:  :Big Grin: 

I received his payment within the hour!  :Roll Eyes (Sarcastic):

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## Dave A

:Rofl: 

But are you really not BEE compliant? It's actually quite a mission not to be.
To achieve a low score is one thing, being not compliant is another completely.

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## Moneymaker

Well my understanding at the time was I am a white dude who wrote some books and developed a game, I went around the country speaking to people on financial subjects. Had no staff? I'd lost several business deals in other companies because we never met the standard despite having a 70/30 affirmative/non-affirmative ratio...so figured 100% whitey = failing score?

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## Dave A

Originally, BEE was very narrow and looked at ownership only. This has now been widened considerably.

But even as an individual, with a turnover of less than R5 million per annum you're an "exempt enterprise." Therefor, BEE compliant. 

Sure, that turnover can be exceeded by an individual, but as you have already shown, those that exceed those turnovers generally have something going for them that overcomes problems that BEE rating might pose.

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## duncan drennan

> Sure, that turnover can be exceeded by an individual, but as you have already shown, those that exceed those turnovers generally have something going for them that overcomes problems that BEE rating might pose.


I think something that a lot of people don't realise is that BEE is structured around procurement, not ownership. The focus has been on ownership, but the codes all point to procurement. Let me explain....

Your BEE rating only plays one role in another companies BEE rating, and that is under the procurement pillar. The idea is to encourage companies to buy from BEE companies, as that will improve their own rating. Obviously in practice things run a little differently, but that is the theory behind it - as least the way I read the codes.

The flip side of that reality is that if you have something to offer which is more important than your BEE rating, there is nothing stopping another company from buying from you. The procurement points they get from you are either zero or reduced (depending on your particular BEE level). Also remember that their procurement points are based on the percentage of their total procurement spend with you e.g. if the company has a R100mil procurement spend, and they spend R100k with you, the points are something along the lines of 0.1% x (your rating), which in this example plays a very small role.

There is no law which says you MUST be BEE compliant (AFAIK). If you work closely with the government and have competition then you would practically be required to comply in some way. Otherwise evaluate it as part of a wider strategy in growing your business, and each case will be different.

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