The current Exchange Control Regulations place restrictive controls on the transfer of South African owned intellectual property (IP) to any persons or entities outside of South Africa. South African residents who own IP are currently required to obtain approval for transfers of their IP and for the outward licensing of South African IP to non-residents. These Exchange Control Regulations have limited and restricted owners of IP in South Africa from commercialising their valuable IP.
In 2017, the South African Reserve Bank (SARB) introduced some modernisation, in terms of which the approval of certain IP transactions between non-related parties, could be approved by an Authorised Dealer. Despite this modernisation, the current position, as set out in the Currency and Exchanges Manual for Authorised Dealers, is that depending of the structure of the transaction, the transfer and licensing of SA-owned IP to a non-South African resident, whether related or unrelated, requires approval from either an Authorised Dealer or the SARB.
As some welcome relief to the current situation, the National Treasury has proposed "modernising the foreign-exchange system", as set out in Annexure E to the 2020 Budget Review issued pursuant to the Budget Speech of the Minister of Finance on 26 February 2020. The proposal is that the Exchange Control Regulations will be amended and that no approval will be required for the export of IP for fair value to non-related parties. It is foreseeable that some certain documentation will still be required for these transactions, for example, (i) the written agreement between the parties; (ii) a valuation confirming the fair value of the IP concerned; and (iii) proof that the parties are unrelated. It appears that approval will still be required for the export of SA-owned IP to a non-South African resident, which is a related party.
Please note that the policy statement by the National Treasury has not yet been passed into law and has not yet been officially implemented. The exchange control regulations are amended once the amendments have been published in the Government Gazette and thereafter the SARB issues circular updating the Currency and Exchanges Manual for Authorised Dealers.
National Treasury has indicated that the exchange control reforms will be rolled out over the next 12 months. KISCH IP will be closely monitoring the relaxing of these Exchange Control Regulations and we will be providing further updates, as and when further developments occur.
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