SA tech firms can now transfer IP offshore

Exchange controls have been relaxed to allow for the practice, though the rules remain fairly strict.

South African technology firms and other companies can now transfer intellectual property (IP) offshore thanks to a relaxation of exchange control regulations in this regard.

One of challenges that private companies in South Africa have faced is their inability to tap into international venture capital markets, with the main obstacle being exchange control regulations, particularly those relating to intellectual property assets, says Chris Bull, an IP director at law firm ENSafrica.

“The relaxation only applies to private companies operating in the technology, media, telecommunications, exploration and research and development sectors. It is exciting news and presents a wonderful opportunity for companies operating in these sectors,” says Bull.

“In essence, the guidance from the South African Reserve Bank is that it will allow private companies operating in these sectors to seek approval for a primary listing offshore or to raise capital and loans offshore on the back of their IP assets,” he says.

“The new dispensation isn’t available to companies listed in South Africa and companies wishing to take advantage of the new guidelines need to comply with certain strict criteria.”

The IP can be transferred to a new offshore company provided that the offshore company operates as a South African tax resident and is managed and controlled from South Africa.

Some South African companies already hold their intellectual property in offshore IP holding companies operating under similar conditions, but these have always been approved in the past as special, once-off approvals, says Bull.

“The challenge with this approach was that it increased the cost and complexity of obtaining approval for these offshore IP holding companies. The new guidelines help formalise the approach that is being taken by the Reserve Bank and will hopefully streamline the process of getting the necessary approvals.”  — (c) 2014 NewsCentral Media