SA Reserve Bank Offers a Limited Relaxation of Exchange
Control Rules for Unlisted Technology, Media, Telecommunications,
Exploration or "Other Research and Development"
South Africa's exchange control rules require that a South
African resident wishing to assign intellectual property to a
foreign entity must obtain prior approval from the South African
The Reserve Bank's Financial Surveillance Department has
recently issued a circular amending the exchange control rules. The
amendment relaxes the exchange control rules, to a limited extent,
to allow unlisted South African companies to list on stock
exchanges located offshore and raise foreign loans and capital more
To qualify for the exception, the entity must be: (i) a South
African company, (ii) operating in the technology, media,
telecommunications, exploration or "other research and
development industry," and (iii) not currently listed on the
South African stock exchange. The entity must also:
register with the Financial Surveillance Department;
operate as a South African tax resident;
be incorporated in South Africa and effectively managed and
controlled in South Africa;
ensure that its intellectual property remains registered in
South Africa. However, intellectual property may be
assigned offshore, subject to appropriate tax treatment;
submit an annual report on the operations including details of
the funds raised offshore to the Financial Surveillance
Furthermore, if the entity intends to list offshore, it
submit a report on the status of the offshore listing to the
Financial Surveillance Department; and
within two years of successfully listing offshore, list on the
South African stock exchange.
Despite the fairly onerous requirements this represents a
welcome step in the right direction in helping private South
African companies access international venture capital markets and
seek primary listings offshore.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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