1.0 Background Information
The African Agricultural Technology Foundation (AATF) is a not-for-profit organisation that embraces a mission of making available, to smallholder farmers, agricultural technologies that were previously not accessible to them. AATF facilitates public-private partnerships and works in 23 African countries with the governments, private and public technology owners and developers, seed companies, other value chain players and African farmers to identify, access, adapt and commercialize technologies that address farmers’ key problems and empower them to generate wealth and health for their families and communities.
AATF also works to address some of the obstacles to technology transfer across the food value chain from research, production, and processing through to market linkages. A priority area is to improve Africa’s seed system where one bottleneck is Foundation Seed. To mitigate the problem of Foundation Seed supply, the vital missing link in the maize seed value chain in most SSA countries, AATF with support from Bill and Melinda Gates Foundation (BMGF) established and has been incubating a foundation seed company called QualiBasic Seed Company (QBS). AATF currently holds 100% of QBS shares, in trust for future potential shareholders, as part of ensuring QBS becomes a truly independent commercially sustainable company providing impact in the seed supply chain to small-scale farmers and contributing to food secure Africa. As part of identifying suitable shareholders as well as preparing for a divestiture, legal and tax considerations need to be analysed.
QualiBasic Seed Company (QBS)
QBS was operationalized by the AATF in 2017, with grant funding from the BMGF, to offer a commercially sustainable foundation seed supply solution to seed companies. QBS supports seed companies in Sub-Saharan Africa with the supply of high-quality foundation seed to ensure the subsequent production of quality certified seed by operating a centralised system that manages foundation seed production, quality control and storage, in a highly effective and efficient way. QBS benefits from economies of scale and applies rigorous processes to its foundation seed production, based on similar models in other parts of the world such as the USA and India. This specialised and highly focused foundation seed supply model has helped these countries not only address critical quality aspects but also to ensure high productivity. In addition, this model of doing business saves seed companies cost and seed production failure risks and builds a good reputation among end users. QBS is registered and headquartered in Nairobi, Kenya has a subsidiary registered in Zambia and a branch registered in South Africa, as a company with foreign ownership, it has current operations and staff in Zambia and Kenya with South Africa in “care and maintenance”. It currently has at least 50 customers in 10 countries.
2.0 Purpose and Approach of the Consultancy
The main purpose of this consultancy is to assess and provide key legal and tax considerations/consequences for various categories of future potential shareholders/investors of QBS from different geographies.
Specific Objectives of the Consultancy
- Determine the key legal and tax considerations that apply to various categories of current and future different types of QBS shareholders/investors in different countries
- Determine key legal and tax considerations in its divestiture for the current Shareholder in trust (AATF).
- Assess and determine the ideal time to value QBS to inform impact on raising capital and tax implications on shareholders.
- Perform a high-level review of tax compliance of QBS and the shareholder for the past 3 years to evaluate for potential tax exposure.
3.0 Key Questions
- What are the tax implications to investors buying shares?
- Which is the ideal time to place a value on QBS and what is the tax implication for shareholders?
- What are the pros and cons of valuing QBS when it is at its highest and when it is at its lowest and what impact will each of these have on raising capital for the company?
- What are the annual tax and statutory reporting implications for QBS and for foreign investors (non-nationals of Kenya, Zambia, and South Africa where QBS is registered)?
- What is the tax liability (and to whom) of QBS shares that have value and are gifted to an individual /employee, business entity or non-profit organization?
- What is the tax liability for companies that benefit from beneficial ownership, and is there a tax liability related to dividends and to product credits given in lieu of dividends?
- What Kenyan and Zambian tax laws apply to the purchase or allotment of shares?
- Are there any jurisdictional issues to be aware of for investors buying shares in QBS Kenya or Zambia and residing in another country?
- What guidelines should govern shareholders when dealing in shares – selling and transferring shares and how will the shares be valued?
- What are the tax implications and possible tax exemptions for AATF holding the shares in trust when it divests the shares?
- Assess the tax, any statutory reporting or share value implications of writing off inter-company loans in QBS and its subsidiary companies.? – Grant money was provided to QBS Kenya from AATF some of which was disbursed to South Africa and Zambia to support investment and operations in the form of inter-company loans.
- Are there any tax and legal implications to consider for the QBS group versus the separate companies in Kenya (including South Africa) and Zambia?
- What is the best optimal group structure that is aligned to business objectives, tax efficiency, and in line with capital needs to allow maximization of shareholder’s value?
4.0 Scope of Work
The consultant in consultation with AATF, QBS and BMGF legal teams shall be expected to undertake the following tasks:
- Conduct a desk review of legal and tax documents on shareholding in Kenya, Zambia, and South Africa.
- Review QBS financial statements and any other relevant documents.
- Prepare a comprehensive report responding to the above questions.
5.0 Expected outputs
- A final report on key legal and tax considerations that apply to QBS shareholders, including impact on valuing QBS, inter-company loans, tax and
- A slide deck with the main aspects of the report
- At least two presentations of the findings to a wider audience than the AATF project team, including to the QBS
6.0 Expected profiles of the consultants
- The consultant(s) should have 10+ years of experience providing legal and tax advisory support and services in the private sector.
- Being able to provide legal and tax advice for the three jurisdictions Kenya, South Africa and Zambia.
- Demonstrated expertise and experience in business, legal and taxation services.
- Experience with companies looking for transition shareholding and demonstrated experience in advising growth companies.
- High degree of independence, flexibility, and ability to meet strict deadlines.
7.0 Application criteria
Interested consultants should submit detailed technical and financial proposals (not more than 8 pages) covering:
- Capacity Statement
- Demonstrated understanding of the terms of reference
- Proposed methodology to be used in the undertaking of the assignment
- A detailed work plan (time and activity schedule).
- A detailed financial proposal
The proposal should, in addition to the above, be accompanied by the below as annexes:
- Clearance certificates from relevant bodies
- Profile and CV of the consultant (s).
- Samples of three most recent related works (and/or references for the same with contact details of the referees.
8.0 Timeline and Estimated Consulting Days
This consulting assignment is expected to begin in early November 2022 and is to be completed no later than December 15th, 2022. It is estimated that the number of consulting days would be 20 and that there is no travel needed to do the desk research and virtual consultations.
There will be travel needed to meet the project team from AATF and QBS for inception and final report presentation depending on the location of the consultant.
An advanced draft report is to be presented to the QBS Board virtually for their input end of November 2022.
9.0 Evaluation & Award of the Consultancy
AATF shall evaluate the proposals and award the assignment based on technical and financial feasibility. AATF reserves the right to accept or reject any proposal received without giving reasons and is not bound to accept the lowest or the highest bidder.
10.0 Terms and conditions of the proposal
AATF reserves the right to request new or additional information regarding each service provider and any individual or other persons associated with its project proposal. AATF reserves the right not to make any appointment from the proposals submitted. Service providers shall not make available or disclose details pertaining to their Project proposal with anyone not specifically involved unless authorized to do so by AATF. Service providers shall not issue any press release or other public announcement pertaining to details of their project proposal without prior written approval.
AATF Service providers are required to declare any conflict of interest they may have in the transaction for which the tender is submitted or any potential conflict of interest. AATF reserves the right not to consider further any proposal where such a conflict of interest exists or where such a potential conflict of interest may arise.
11.0 Confidentiality Statement
All data and information received from AATF for the purpose of this assignment are to be treated as confidential and are only to be used in connection with the execution of these Terms of Reference. All intellectual property rights arising from the execution of these Terms of Reference are assigned to AATF.