Ownership: The difference between Economic Interest and Voting Rights

The intention of Broad Based Black Economic Empowerment was never to give people money or shares and then forgetting about the actual purpose thereof.

When an individual is given shares without participating and learning about the nature and control of the business, it will not contribute to economic growth and defeats the object.

Ownership is about sharing the economic fruits of the business between the shareholders, but also sharing the knowledge of successful ownership.

So, what is Ownership?

There are 2 components namely:

-?????? Voting Rights (the ability to influence the decision of the company).

-?????? Economic interest (the right to share in the economic fruits of the company)

These two components are not always linked.? A shareholder’s voting rights may differ from the economic interest.

The BEE Codes differentiates between Control (represented by voting rights), Economic Interest (usually the right to dividends) and Realisation of unencumbered interest (represented by Net Value).

To verify the legal structure of Ownership, the voting rights and economic interest are measured, but Net Value points shows the economic substance behind the ownership structure.

Some people also confuse Director voting rights with Shareholder voting rights.? It is important to remember that a Shareholder’s voting rights is measured by the right to vote as a Shareholder (usually to make financial decisions such as dividends to be declared).? Director’s voting rights is usually linked to the day-to-day operations of the company.

At Elevate Advisory Partners we will investigate the best possible Ownership solution for your company.? Contact us at [email protected] for more information.

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