CURRENT POSITION ON TRANSFERS OF FISHING RIGHTS


Dear Clients

As you are all aware, as of 31 December 2020 commercial fishing rights allocated in terms of section 18 of the Marine Living Resources Act 18 of 1998 (MLRA) in the following sectors expired and have reverted back to State: Hake Deep Sea Trawl, Small Pelagic, South Coast Rock Lobster, KZN Prawn, Hake Longline, Tuna Pole-Line, Squid, Demersal Shark, Tuna Longline, Traditional Linefish, Hake Handline, Oyster and White Mussel.

As a result of the significant delay in the Fishing Rights Allocation Process 2020/21 on the 25th of November 2020 the Department of Environment, Forestry and Fisheries ( DEFF) published a notice advising all holders of Commercial Fishing Rights whose rights expired on 30 September 2020 and / or 31 December 2020 that as of the date of expiration of their commercial fishing rights, right holders in these sectors would be exempted in terms of section 81 of the MLRA from the provisions of section 18 ( 1 ) of the MLRA which requires one to hold a commercial fishing right granted by the Minister in order to engage in commercial fishing. Accordingly, on the 30th of November 2020 DEFF published a further notice advising that all holders of Commercial Fishing Rights whose rights expired on 30 September 2020 and / or 31 December 2020 that as of 11 December 2020 a moratorium would be placed on the submission of all notifications and applications in terms of section 21 of the MLRA in order to allow all notifications and section 21 applications to be processed by the 31 December 2020 (“the moratorium”).

As right holders in the aforementioned sectors are no longer the holders of commercial fishing rights allocated in terms of section 21 of the MLRA this raised the question of the applicability of section 21 of the MLRA and the Policy for the Transfer of Commercial Fishing Rights 2009 (the Transfer Policy) to those currently operating under an exemption from the provisions of section 18 (1) of the MLRA (Exemption Holders)? At face value the answer to this question may seem obvious in that section 21 of the MLRA and the Transfer Policy are only applicable to the holders of commercial fishing rights allocated in terms of section 18 (1) and as Exemption Holders are not the holders of commercial fishing rights allocated in terms of section 18 (1) of the MLRA it stands to reason that section 21 of the MLRA and the Transfer Policy are not applicable to Exemption Holders. As a result Exemption Holders may be under the impression that owing to the fact that section 21 of the MLRA and the Transfer Policy is not applicable to Exemption Holders that Exemption Holders are permitted to transfer shares or members interest in an Exemption Holder without either notifying DEFF or seeking DEFF approval.

However, Exemption Holders are required to apply for a catch permit in terms of section 13 of the MLRA and the said catch permit is issued under certain permit conditions. In this regard, it is notable that the 2021 Permit / Exemption Conditions include the following provision:

TRANSFER OF FISHING RIGHTS

16.1The Exemption Holder may only transfer the long-term commercial fishing right allocated to it in terms of section 21 of the MLRA read together with the Policy for the Transfer of Commercial Fishing Rights (Gazette No 32449).

16.2 Any transfer of shares or sale of shares and/or or membership interest that results in a change in control or ownership of the Exemption Holder must be approved by the Department in terms of section 21.

16.3 Failing to comply with 16.1 and/or 16.2 may lead to the initiation of further legal proceedings including but not limited to proceedings in terms of section 28 of the MLRA.

It is evident from the wording of the above condition that this is clearly a hangover from the 2020 Permit Conditions when the now Exemption Holders were the holders of commercial fishing rights. This is evidenced by the fact that condition 16.1 states that the Exemption Holder may only transfer long-term commercial fishing rights allocated in terms of section 21 of the MLRA and the Transfer Policy. This is clearly an error on DEFF’s part as Exemption Holders do not hold long term commercial fishing rights and the MLRA does not permit one to transfer an exemption. Notwithstanding this obvious error, this does raise the question of the applicability of condition 16.2 which states that any transfer of shares / members interest that results in a change of control or ownership of the Exemption Holder must be approved by the Department in terms of Section 21? We have accordingly requested DEFF’s official position in respect of transfers of shares / members interest in exemption holders post 31 December 2020 and, in this regard, DEFF have advised the following:

  1. An exemption is a special exceptional authorisation and as such cannot be used outside the legal framework.
  2. The exemption issued was only an exemption from section 18 of the MLRA and not from any other provision of the MLRA.
  3. One of the general conditions of the exemption is that a section 13 permit must be obtained. These permits have been issued subject to conditions which include section B General conditions. These conditions clearly state that the permit is issued subject to various laws and policies including the Transfer Policy. As such, the permit and therefore the exemption, cannot be transferred without following the provisions of the Transfer policy.
  4. In addition, the MLRA and its policies as they relate to the allocation of rights are structured in such a way to ensure transformation of the industry. It is not consistent to therefore argue that an exemption holder can simply change shareholding without any permission and operate outside the legal framework and the objectives of the MLRA.
  5. It is therefore the view of the Department that exemption holders who change minority shareholding should notify the Department as required by the Transfer policy and that any exemption holder/permit holder who wishes to change majority shareholding should follow the provisions of the Transfer policy and apply for permission to transfer.

DEFF have further advised that they will be amending the 2021 permit / exemption conditions to make the said conditions subject to the provisions of the Transfer Policy.

In light of the above DEFF have essentially advised that transfers of shares / members interest in Exemption Holders are permissible but subject to compliance with the provisions of section 21 of the MLRA and the Transfer Policy. As such if an Exemption Holder transfers shares or members interest then one is either required to submit a section 21 application in respect of a transfer of shares / members interest that amounts to change of control or a reduction in black ownership or one is required to submit a notification in the prescribed from in respect of a minority transfers of shares / members interest that does not result in a reduction in black ownership.

Finally, this leads one to the further question of the effect of the moratorium placed on section 21 applications and notifications? In this regard DEFF have advised that the moratorium on section 21 applications and notifications was only applicable in the aforementioned sectors before 31 December 2020, when the commercial fishing rights in the aforementioned sectors were still valid. As such, as of 1 January 2021 the moratorium on section 21 applications and notifications is no longer applicable to Exemption Holders.

In light of the above we would strongly advise all Exemption Holders to seek legal advice regarding compliance with section 21 of the MLRA and the Transfer Policy before implementing any changes of shareholding / members interest so as to ensure compliance.

If you have any questions, please do not hesitate to contact us.

Kind regards

Nicholas Britz