“The lack of adequate, accurate and up-to-date beneficial ownership information facilitates money laundering and terrorist financing by allowing criminals to hide their true identities, and the true purpose and/or source or use of funds.” (Financial Intelligence Centre – FIC)
South Africa’s grey listing by the Financial Action Task Force (FATF) earlier this year and the subsequent passing of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022, resulted in amendments to the Companies Act, among others.
The changes to the Companies Act mean that company directors are now obliged to implement a detailed beneficial ownership register for their companies and submit the register to the Companies and Intellectual Property Commission (CIPC), along with a list of supporting documents. Such a register must also be kept up-to-date and verified annually.
Who must file a beneficial ownership register?
The vast majority of private companies must file a beneficial ownership register, but there are some complicated issues at play here and you would be well-advised to check with your accountant as to exactly what your company’s obligations are in terms of these new rules.
What are the penalties?
Failure to comply with the provisions relating to the beneficial ownership register requirements is an offence in terms of the Companies Act. A compliance notice may be issued in cases of non-compliance and an administrative penalty may be imposed.
What are the deadlines?
Entities incorporated before 24 May 2023 will be required to file the records of their Beneficial Interest Register as part of their Annual Returns filing process from 24 May 2023, the date of publication of the final Amended Companies Regulations.
Entities incorporated after 24 May will be required to file the records of their beneficial ownership within 10 days after incorporation.
What is required?
The beneficial owners of a company must be identified, their information collated and a register containing this information must be filed with CIPC.
A “beneficial owner” in respect of a company, means an individual/natural person who directly or indirectly, ultimately owns 5% or more of that company, or exercises effective control of that particular company, including through:
- The holding of beneficial interests in securities of that company.
- The exercise of, or control of the exercise of the voting rights associated with the securities of the company
- The exercise of, or control of the exercise of the right to appoint or remove members of the board of directors of that company.
- The holding of beneficial interest in the securities, or the ability to exercise control, including through a chain of ownership or control of a holding company of that company.
- The ability to exercise control, including through a chain of ownership or control of a juristic person other than a holding company of the company, a body of persons corporate or unincorporated, a person acting on behalf of a partnership, a person acting in pursuance of the provisions of a trust agreement; or
- The ability to otherwise materially influence the management of that company.
For each beneficial owner identified, the following information is required:
- Full names, ID number or passport number with date of birth, or registration number
- Business or residential and postal address
- Email address
- Confirmation as to the participation and extent of the beneficial interest.
All this information must be collated in a register that provides indexed access to all relevant entries for any one person. In addition, the information must be treated as confidential and adequate precautions must be made against theft, loss, damage, destruction and falsification.
This register must then be kept up to date, with changes updated with CIPC as soon as practical, but no later than 10 business days after notification.
This register must be lodged with CIPC through an online process detailed in a 16-page Guide, along with a list of supporting documents that must be uploaded. An updated register must also be submitted with the Annual Returns each year.
Great advice for trouble-free filing
While it remains the responsibility of the directors of companies and members of close corporations, as part of their due diligence and governance duties, to ensure beneficial ownership filing is facilitated as and when applicable, the assistance of an accountant is highly recommended, given the complexities, the tedious processes and ongoing maintenance requirements, as well as the risk of non-compliance, which constitutes an offence and may incur administrative penalties.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
© CA(SA)DotNews