SARS – Binding Class Ruling

The parties to the proposed transaction are as follows:

-        The applicant(s): Resident companies forming part of the same group of companies as defined in section 1(1) of the Income Tax Act 58 of 1962 (“IT Act”);

-        The co-applicant/Trust: A trust to be created to administer the share incentive scheme;

-        Employees: Employees of the applicant’s participating in the share incentive scheme.

The ultimate holding company of the applicants is “Holdco”, a public company tax resident in a foreign country (Country X), whose shares are listed on an exchange in Country X. The applicants propose to establish an employee share incentive scheme.

The purpose of the employee share incentive scheme will be to incentivise all the participating employees. This will be achieved by the participating employees being entitled to on-going  dividends and  indirectly  the  capital appreciation of  the  scheme  shares  by  virtue of  being entitled  to so-called milestone distributions and leaver distributions as defined in the scheme rules and trust  deed.

The applicants will make contributions to the Trust to enable it to purchase and acquire listed shares in Holdco.

The following proposed features of the trust deed of the Trust are relevant:

• Once the Trust acquires shares in Holdco, the employees will be allocated notional units in the Trust for no consideration;
• The employees will be allocated one unit each by the trustees. The unit will entitle the employee to a portion of the dividend distributions, milestone distributions and leaver distributions via the Trust;
• On ceasing employment, an employee forefeits the unit awarded for no value. Such unit may be reallocated or cancelled by the trustees. The benefits to be derived are dependent on the employee remaining in employment.

The proposed transaction will be achieved by way of the following transaction steps:

• Step 1: The applicants make cash contributions to the Trust.