South Africa liberalizes transaction of IP assets

The South African National Treasury announced, on 22 February 2017, the intention to eliminate the current regimen’s restriction to the Intellectual Property assets’ transaction, by liberalizing the transactions in this area. These are good news for entrepreneurs and investors.

The Government proposes that companies and individuals no longer need the approval of the South Africa’s Central Bank for standard Intellectual Property transactions. It is also proposed that the “Loop structure” restriction regarding all Intellectual Property transactions be suppressed, given that they are at arms-length and at a fair market price. These restrictions restrain residents from holding any South African asset indirectly, through a nonresident entity.

This proposal’s details still need to be clarified, namely the concept of “standard Intellectual Property transactions”, as well as this measure’s implementation in Law. However, this announcement should be seen as a step forward on the removal of obstacles for South African entrepreneurs, that intend to expand their business globally, develop Intellectual Property locally, or boost their capital though international markets. 

Since 2012, transactions in which IP held by a South African were assigned our licensed to a non-South African needed the prior approval of the Central Bank. Such restrictions affected mostly the star-ups and the technological businesses. Many opted for relocate operations to territories that were not bounded to these restrictions, while others were passed up for funding by international investors, due to the increase in investment’s risk. Multinationals have also frequently opted for moving into other territories, in order to avoid these regulatory constraints.

In this sense, realizing the consequences of exchange control rules that applied to Intellectual Property, the National Treasury made an effort to get into an agreement with the key stakeholders in 2016. This outcome means that these discussions have begun to be fruitful. In the meantime, to evaluate the result of these modifications, the complete details of the proposal are eagerly awaited.